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Prior research suggests that managers adopt disclosure strategies to exacerbate sentiment driven overvaluation, concluding that managers either "Keep quiet" or inject bias into certain voluntary disclosures during high-sentiment periods. The author provides evidence that managers of overvalued firms increase their earnings guidance frequency when investor sentiment is high, especially for firms with higher institutional ownership and higher litigation risk. They also find that firms with more optimistic analyst forecasts at the beginning of the quarter exhibit larger increases in guidance frequency during high-sentiment periods, and that guidance news and market reactions around guidance issuance are more negative for firms subject to sentiment driven overvaluation.
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