Voluntary disclosure with evolving news

Cyrus Aghamolla, Byeong Je An

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

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 languageEnglish (US)
Pages (from-to)21-53
Number of pages33
JournalJournal of Financial Economics
Volume140
Issue number1
DOIs
StatePublished - Apr 1 2021
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2020

Keywords

  • Communication
  • Dynamic disclosure
  • Evolving information
  • Price drop
  • Return skewness
  • Voluntary disclosure

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