The effect of stock price on discretionary disclosure |
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Authors: | Ewa Sletten |
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Institution: | (1) Boston College, 140 Commonwealth Ave., Chestnut Hill, MA 02482, USA |
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Abstract: | 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. |
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Keywords: | |
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