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Businesses Airing Bad News on Friday Afternoon May Get More Scrutiny

While companies tend to wait until week’s end to announce bad news, doing so opens them up to scrutiny.

Friday night is a popular time for companies to release bad news. Corporations will slip a poor report into the news wire when they believe everyone has fled for the weekend. But this old PR trick may not be relevant in the world of the 24-hour news cycle. In fact, an attempt to bury a bad press release on a Friday afternoon may lead to more scrutiny.

Lee Simmons of The Atlantic brings attention to a working paper that argues Friday filings will fall under more than a few suspicious eyes. The study noticed that busy days, when a lot of companies are filing at once, may be the best time to slip in a less than great company report. Ed deHaan, Accounting Professor at the Stanford Graduate School of Business, explains:

“That frequency of benign changes is the camouflage necessary for strategic changes. It means there’s a big enough pool to hide in.”

There research team found a trend in their study that bad news is typically released on Friday, whereas good news is scheduled during times when attention is predicted to be higher. In summation:

“…it is unlikely that managers are able to effectively hide bad news by reporting immediately prior to the weekend. Instead, the preponderance of strategically reporting bad news on Fridays is possibly due to managers incorrectly perceiving attention as lower on Friday.”

As it turns out, even releasing a press release during trading hours could negatively effect your stock. The authors reference a particular incident when Google accidentally released an underwhelming quarterly report in 2012. Traders responded with lightning speed, and the stock lost $22 billion in what boiled down to skimming the release rather than reading it through.

If you do decide to schedule announcements on Friday, it may come with the effect of investors predicting a bad report before it’s even read and some peeved financial journalists, according to Simmons.

Read more at The Atlantic

Photo Credit: Shutterstock


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