Bury Bad News on Fridays? Bad Idea.

Much like in politics, releasing negative news before the weekend has been a dependable way for companies to avoid intense scrutiny. Sure people would notice, but by Monday when everyone was fully recharged and back at their desks, a rush of new news would waiting to distract.

Still, recent research has shown that the strategy doesn't really work anymore. According to this 2004 study which looked at earnings releases between 1995 and 2003, even though investors were typically slow to react to Friday announcements, they eventually got a full whiff of the stinky news after a few days and the offending company's stock would fully reflect the information.

Now, new research looking at a broader set of earning releases between 1989 and 2006 finds that investors have fully caught up with companies' hide-and-seek games. The new twist, says Leon Zolotoy at Tilburg University in the Netherlands, is that investors react more aggressively to negative earnings announcements on Fridays than on other days:

Overall, our findings suggest that over time investors learned about the tendency of the firms to release "bad" news on Fridays...Our findings suggest that for the last ten years the investors systematically overreact to the "bad" earnings announcements released on Fridays, compared to their response to the "bad" news released during other trading days.

It seems that investors now see negative earnings news released on Fridays as being particularly bad.