Corporate Disclosure, Government Bailout, and Liquidity Crisis

Kyounghun Lee (), Frederick Dongchuhl Oh () and Junghum Park ()
Additional contact information
Kyounghun Lee: WOORI Finance Research Institute, Seoul
Frederick Dongchuhl Oh: Seoul National University
Junghum Park: Lietuvos Bankas, Vilnius University

No 145, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: This study examines the effects of a government bailout on corporate disclosure when a firm is exposed to the risk of investors withdrawing their investments from the firm. The government bailout affects the behavior of investors, which, in turn, alters the disclosure behavior of the firm. We find that the firm discloses less (more) than the case without a bailout when investors have pessimistic (optimistic) beliefs about the firm. These changes in disclosure decision reduce investors’ expectations about the firm’s fundamentals. Therefore, the government bailout can increase the likelihood of the firm facing a liquidity crisis if it distorts the disclosure behavior of the firm.

Keywords: Corporate Disclosure; Government Bailout; Liquidity Crisis; Coordination Failure; Global Game (search for similar items in EconPapers)
JEL-codes: D82 D83 G01 G28 M40 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2026-07-30
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