The Cost of Managerial Myopia: Evidence from Earnings Guidance Cessation

We examine the consequences of firms ceasing quarterly earnings guidance, a practice increasingly advocated by governance experts to reduce short-termism. Using a staggered adoption design, we find that guidance cessation leads to increased long-term investment, reduced earnings management, but also higher information asymmetry and bid-ask spreads. The net effect on firm value depends critically on the quality of alternative disclosure channels.