Investor Sentiment and Corporate Disclosure

37 Pages Posted: 23 Apr 2007 Last revised: 13 Mar 2008

See all articles by Nittai Bergman

Nittai Bergman

Tel Aviv University; National Bureau of Economic Research (NBER)

Sugata Roychowdhury

Boston College

Date Written: March 6, 2008


This paper investigates how firms react strategically to investor sentiment via their disclosure policies in an attempt to influence the sentiment-induced biases in expectations. Proxying for sentiment using the Michigan Consumer Confidence Index, we show that during low-sentiment periods, managers increase forecasts to "walk up" current estimates of future earnings over long horizons. In contrast, during periods of high sentiment, managers reduce their long-horizon forecasting activity. Further, while there is an association between sentiment and the biases in analysts' estimates of future earnings, management disclosures vary with sentiment even after controlling for analyst pessimism, indicating that managers attempt to communicate with investors at large, and not just analysts. Our study provides evidence that firms' long-horizon disclosure choices reflect managers' desire to maintain optimistic earnings valuations.

Keywords: Disclosure, Investor Sentiment, Management Forecasts, Voluntary Disclosure

JEL Classification: M10, M40, M41, M45, G29, G30, E44

Suggested Citation

Bergman, Nittai and Roychowdhury, Sugata, Investor Sentiment and Corporate Disclosure (March 6, 2008). Available at SSRN: or

Nittai Bergman

Tel Aviv University

Ramat Aviv
Tel-Aviv, 6997801

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sugata Roychowdhury (Contact Author)

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-1764 (Phone)

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