Working Paper: NBER ID: w31935
Authors: Kerry Back; Bruce I. Carlin; Seyed Mohammad Kazempour; Chloe L. Xie
Abstract: We study strategic disclosure timing by correlated firms in the presence of risk-averse investors. Firms delay disclosures in the hope that positively correlated firms will announce especially good news and lift their own price. Risk premia rise before disclosures, drop when disclosures occur, and then rise again. Conditional risk premia can be much larger than unconditional risk premia. Disclosures are always good news, but disclosures that are only moderately good news induce clustering of disclosures by other positively correlated firms. We present evidence of strategic behavior in earnings announcement timing as predicted by the model.
Keywords: No keywords provided
JEL Codes: D83; G12; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firm A delays disclosure (G34) | Firm A's price increases when correlated Firm B discloses positive news (G19) |
| Nondisclosure (Y40) | Increase in risk premia (G19) |
| Peer disclosures (Z13) | Conditional risk premia higher than unconditional risk premia (D81) |
| Disclosures perceived as bad news (G14) | Positive jumps in stock prices (G12) |