Opportunistic timing of management earnings forecasts during the COVID-19 crisis in China

This study assumes that the severity of local COVID-19 spread can capture the short-run fluctuation of macro-level uncertainty in business environments. Given capital-market pressure and incentives to obtain favourable considerations from the government and lenders, we hypothesise that COVID-19-induced uncertainty can lead managers to release (delay) preexisting firm-specific bad (good) news. Our baseline results show that firms are more likely to disclose unfavourable (favourable) 2019 forecasts in days when recent COVID-19 cases in headquarter provinces increase (decrease). Results in further analyses provide evidence on the aforementioned reporting incentives by showing that the opportunistic timing behaviour is more prominent in firms with higher managerial ownership, non-state ownership, and in firms under financial distress. In addition, we uncover the role of local marketisation level and medical resources in mitigating the opportunistic timing behaviour. Finally, the analysis of market reactions shows that the manipulation of disclosure dates can influence the market price in a favourable direction for firms. Overall, our paper presents a comprehensive picture of corporate opportunistic timing behaviour amid the COVID-19 crisis.