Shareholder Short-Termism, Corporate Control and Voluntary Disclosure

Xue Jia () and Rahul Menon ()
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Xue Jia: Department of Accounting, The University of Melbourne, Victoria 3010, Australia
Rahul Menon: Krannert School of Management, Purdue University, West Lafayette, Indiana 47907

Management Science, 2023, vol. 69, issue 1, 702-721

Abstract: This paper examines how a manager uses voluntary disclosure to influence corporate control by a short-term shareholder. Because a short-term shareholder intervenes excessively, the manager’s disclosure strategy is determined by the trade-off between excessive and insufficient intervention. In equilibrium, when shareholder short-termism is not too high, the manager discloses both good and bad news and withholds intermediate news. Alternatively, when shareholder short-termism is high, the manager only discloses good news and withholds bad news. In both equilibria, withholding information is value-enhancing for the nondisclosing firms. We also show that the likelihood of disclosure weakly decreases as the shareholder is more short-term-oriented. Moreover, nondisclosing firms are more likely to face shareholder intervention than disclosing firms.

Keywords: active shareholder; shareholder short-termism; intervention; voluntary disclosure; managerial myopia (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:1:p:702-721

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