Working Paper: CEPR ID: DP8680
Authors: Viral V. Acharya; Peter DeMarzo; Ilan Kremer
Abstract: We consider the strategic timing of information releases in a dynamic disclosure model. Because investors don?t know whether or when the firm is informed, the firm will not necessarily disclose immediately. We show that bad market news can trigger the immediate release of information by firms. Conversely, good market news slows the release of information by firms. Thus, our model generates clustering of negative announcements. Surprisingly, this result holds only when firms can preemptively disclose their own information prior to the arrival of external information. These results have implications for conditional variance and skewness of stock returns.
Keywords: disclosure; disclosure dynamics; strategic disclosure; disclosure timing; earnings announcement; stochastic volatility; skewness
JEL Codes: D8; G3; M4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bad market news (E44) | immediate release of information (Y50) |
| good market news (G14) | slows the release of information (Y60) |
| negative public news (G14) | threshold for firms to disclose their own information (L20) |
| negative public news (G14) | clustering of negative announcements (G14) |
| firm's decision to disclose (G38) | based on the nature of public news (H12) |