EARNINGS DISCLOSURES AND STOCKHOLDER LAWSUITS

This paper provides evidence on whether managers can reduce stockholde r litigation costs by disclosing adverse earnings news 'early'. Incons istent with this idea, I find that voluntary disclosures occur more fr equently in quarters that result in litigation than in quarters that d o not. However, this result occurs because managers' incentives to pre disclose earnings news increase as the news becomes more adverse, pres umably because this reduces the cost of resolving litigation that inev itably follows in bad news quarters. After controlling for these incen tives using estimated stockholder damages, I find some evidence that m ore timely disclosure is associated with lower settlement amounts.