Abstract
We study a dynamic voluntary disclosure setting where the manager's information and the firm's value evolve over time. The manager is not limited in her disclosure opportunities, but disclosure is costly. The results show that the manager discloses even if this leads to a price decrease in the current period. The manager absorbs this price drop in order to increase her option value of withholding disclosure in the future. That is, by disclosing today, the manager can improve her continuation value. The results provide a number of novel empirical predictions regarding asset prices and disclosure patterns over time. These include, among others, that disclosures are negatively correlated in time, and stock return skewness is negatively correlated with lagged returns for firms with low uncertainty over their future profitability, in more competitive industries, and in industries with less informative public news.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 21-53 |
| Number of pages | 33 |
| Journal | Journal of Financial Economics |
| Volume | 140 |
| Issue number | 1 |
| DOIs | |
| State | Published - Apr 1 2021 |
Bibliographical note
Publisher Copyright:© 2020
Keywords
- Communication
- Dynamic disclosure
- Evolving information
- Price drop
- Return skewness
- Voluntary disclosure