Working Paper: NBER ID: w16485
Authors: Viral V. Acharya; Peter M. 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: information disclosure; market news; stock returns
JEL Codes: D82; G14; G30; M41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bad market news (E44) | disclosure timing (G14) |
| good market news (G14) | disclosure timing (G14) |
| bad market news (E44) | clustering of negative announcements (G14) |
| disclosure timing (G14) | clustering of negative announcements (G14) |