Disclosure Similarity and Future Stock Return Comovement

Travis A. Dyer (), Darren T. Roulstone () and Andrew Van Buskirk ()
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Travis A. Dyer: BYU Marriott School of Business, Brigham Young University, Provo, Utah 84606
Darren T. Roulstone: Fisher School of Business, Ohio State University, Columbus, Ohio 43210
Andrew Van Buskirk: Fisher School of Business, Ohio State University, Columbus, Ohio 43210

Management Science, 2024, vol. 70, issue 7, 4762-4780

Abstract: Existing research often assumes that firms’ financial reporting choices influence their return comovement with other firms. We examine the validity of that assumption. First, we provide initial evidence suggesting that similarity in two firms’ disclosures not only predicts but influences future return comovement between those two firms. Second, we show that this predictive ability aggregates to the market level; disclosure similarity can be used to estimate more accurate forward-looking market betas. Taken together, these two results suggest that firms’ reporting decisions can influence their firms’ betas even in the absence of changes to capital structure or operations.

Keywords: disclosure similarity; return comovement; economics of disclosure (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:70:y:2024:i:7:p:4762-4780

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