Bring on the profit warnings

Profit warnings seem certain to rise this year. High-profile restatements have already rattled UK markets while hopes for US corporate profits are fading. Meanwhile, a new study examining the market impact of voluntary profit warnings finds that while the news will likely hammer stock price, it actually boosts liquidity in the markets.‘There is virtue in disclosing bad news,’ observes study co-author Ajit Dayanandan, associate professor of finance at the University of Alaska in Anchorage.