This paper examines the voluntary disclosure practices of firm managers, focusing on earnings-related disclosures by a random sample of 93 NASDAQ firms from 1981-1990. Key findings include: (1) Earnings-related voluntary disclosures are infrequent, with one disclosure for every ten quarterly earnings announcements. (2) Good news disclosures are typically point or range estimates of annual EPS, while bad news disclosures are more likely to be qualitative and have implications for current quarter earnings. (3) The stock price response to bad news disclosures is larger in magnitude than to good news disclosures, with average abnormal returns of -4.48% for bad news versus 1.85% for good news. (4) The frequency of pre-announcement voluntary disclosures is relatively high (20-25%) for large negative earnings surprises but not otherwise. The evidence supports the idea that managers face an asymmetric loss function in disclosure decisions, with larger costs when investors are surprised by large negative earnings news. This is attributed to U.S. securities laws, which allow shareholders to sue firms and managers for failing to promptly disclose important earnings news. An alternative explanation is that investors dislike large negative surprises and impose non-legal costs on managers who are less candid about potential earnings problems. The paper argues that securities laws motivate managers to preempt bad quarterly earnings news. SEC Rule 10b-5 makes it unlawful to make untrue statements or omit material facts. Managers have a duty to disclose information if it becomes inaccurate, incomplete, or misleading. This creates incentives for managers to disclose information before it is required in quarterly earnings reports to avoid legal liability. Empirical evidence shows that the majority of Rule 10b-5 cases are brought after stock price declines, and most are settled before trial. This suggests that large stock price declines generate higher expected legal costs. Managers may also have reputational incentives to preempt bad news, as investors may avoid firms with a reputation for withholding bad news. The paper also highlights the existence of "bad news" disclosures that are often excluded in other studies. These disclosures are more likely to be qualitative and have implications for current quarter earnings. The study finds that managers tend to disclose bad news later in the fiscal year when information becomes "hard" and they are sure there will be no offsetting good news. The paper presents several hypotheses, including that bad news disclosures are more likely to relate to specific quarterly earnings releases and that the stock price response to bad news disclosures is larger in magnitude than to good news disclosures. It also hypothesizes that the probability of preemption is higher for large negative earnings surprises. The study finds that managers are more likely to preempt bad earnings news than good earnings news, consistent with the legal liability argument. The evidence supports the view that managers have incentives to preempt large negative earnings surprises to avoid legal liability and reputational damage. The paper concludes that the legal liability argument is a key factor in managers' voluntary disclosure practicesThis paper examines the voluntary disclosure practices of firm managers, focusing on earnings-related disclosures by a random sample of 93 NASDAQ firms from 1981-1990. Key findings include: (1) Earnings-related voluntary disclosures are infrequent, with one disclosure for every ten quarterly earnings announcements. (2) Good news disclosures are typically point or range estimates of annual EPS, while bad news disclosures are more likely to be qualitative and have implications for current quarter earnings. (3) The stock price response to bad news disclosures is larger in magnitude than to good news disclosures, with average abnormal returns of -4.48% for bad news versus 1.85% for good news. (4) The frequency of pre-announcement voluntary disclosures is relatively high (20-25%) for large negative earnings surprises but not otherwise. The evidence supports the idea that managers face an asymmetric loss function in disclosure decisions, with larger costs when investors are surprised by large negative earnings news. This is attributed to U.S. securities laws, which allow shareholders to sue firms and managers for failing to promptly disclose important earnings news. An alternative explanation is that investors dislike large negative surprises and impose non-legal costs on managers who are less candid about potential earnings problems. The paper argues that securities laws motivate managers to preempt bad quarterly earnings news. SEC Rule 10b-5 makes it unlawful to make untrue statements or omit material facts. Managers have a duty to disclose information if it becomes inaccurate, incomplete, or misleading. This creates incentives for managers to disclose information before it is required in quarterly earnings reports to avoid legal liability. Empirical evidence shows that the majority of Rule 10b-5 cases are brought after stock price declines, and most are settled before trial. This suggests that large stock price declines generate higher expected legal costs. Managers may also have reputational incentives to preempt bad news, as investors may avoid firms with a reputation for withholding bad news. The paper also highlights the existence of "bad news" disclosures that are often excluded in other studies. These disclosures are more likely to be qualitative and have implications for current quarter earnings. The study finds that managers tend to disclose bad news later in the fiscal year when information becomes "hard" and they are sure there will be no offsetting good news. The paper presents several hypotheses, including that bad news disclosures are more likely to relate to specific quarterly earnings releases and that the stock price response to bad news disclosures is larger in magnitude than to good news disclosures. It also hypothesizes that the probability of preemption is higher for large negative earnings surprises. The study finds that managers are more likely to preempt bad earnings news than good earnings news, consistent with the legal liability argument. The evidence supports the view that managers have incentives to preempt large negative earnings surprises to avoid legal liability and reputational damage. The paper concludes that the legal liability argument is a key factor in managers' voluntary disclosure practices