The effect of stock price on discretionary disclosure

The effect of stock price on discretionary disclosure I examine the impact of exogenous changes in stock prices on voluntary disclosure. Specifically, I investigate whether stock price declines prompt managers to voluntarily disclose firm-value-related information (management forecasts) that was withheld prior to the decline because it was unfavorable but became favorable at a lower stock price. Consistent with my predictions, I find that managers are more likely to release good-news forecasts following larger stock price declines but that there is no association between the likelihood of releasing good-news forecasts and the magnitude of stock price increases. Additional evidence indicates that the good-news forecasts eventually conveyed by withholding firms after negative price shocks would likely have resulted in negative market reactions had they been released before the shocks. More generally, I provide evidence that managers withhold bad news and that exogenous stock price declines can induce its disclosure. Review of Accounting Studies Springer Journals

The effect of stock price on discretionary disclosure

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Springer US
Copyright © 2011 by Springer Science+Business Media, LLC
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
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