The effect of stock price on discretionary disclosure

Ewa Sletten ()
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Ewa Sletten: Boston College

Review of Accounting Studies, 2012, vol. 17, issue 1, No 5, 96-133

Abstract: Abstract I examine the impact of exogenous changes in stock prices on voluntary disclosure. Specifically, I investigate whether stock price declines prompt managers to voluntarily disclose firm-value-related information (management forecasts) that was withheld prior to the decline because it was unfavorable but became favorable at a lower stock price. Consistent with my predictions, I find that managers are more likely to release good-news forecasts following larger stock price declines but that there is no association between the likelihood of releasing good-news forecasts and the magnitude of stock price increases. Additional evidence indicates that the good-news forecasts eventually conveyed by withholding firms after negative price shocks would likely have resulted in negative market reactions had they been released before the shocks. More generally, I provide evidence that managers withhold bad news and that exogenous stock price declines can induce its disclosure.

Keywords: Voluntary disclosure; Management forecasts; Stock-price contagion; Bad-news withholding; Restatements (search for similar items in EconPapers)
JEL-codes: G14 G39 M41 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/s11142-011-9165-4

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