Voluntary Disclosure and Its Impact on Share Prices: Evidence from the UK Biotechnology Sector

37 Pages Posted: 7 Jan 2009 Last revised: 28 Nov 2014

See all articles by Elisabeth Dedman

Elisabeth Dedman

Surrey Business School

Steve W. J. Lin

Florida International University (FIU) - School of Accounting

Arun J. Prakash

affiliation not provided to SSRN

Chun-Hao Chang

Florida International University (FIU)

Date Written: January 7, 2009

Abstract

In the UK, SSAP 13 requires that firms immediately expense most of their R&D expenditures. The reported earnings of high-R&D expenditure firms are therefore likely to convey less value-relevant information to investors than those of less research-intensive firms. Using a sample of firms from the high-R&D UK biotechnology/pharmaceutical sector, we find that earnings announcements have a much lower price impact than drug development announcements. We also find that there are significantly more 'good news' voluntary announcements than 'bad news' announcements. Furthermore, our findings indicate that these firms are more likely to announce late than early stage developments, and that the pattern of disclosures, and the market's reaction to them, varies between larger, dominant firms and their smaller counterparts.

Keywords: Voluntary disclosure, firm strategy, market reaction

JEL Classification: G30, I10, L10, M44

Suggested Citation

Dedman, Elisabeth and Lin, Steve W. J. and Prakash, Arun J. and Chang, Chun-Hao, Voluntary Disclosure and Its Impact on Share Prices: Evidence from the UK Biotechnology Sector (January 7, 2009). Journal of Accounting and Public Policy, Vol. 27, No. 3, 2008. Available at SSRN: https://ssrn.com/abstract=1324134

Elisabeth Dedman (Contact Author)

Surrey Business School ( email )

University of Surrey
Stag Hill Campus
Guildford, GU2 7XH
United Kingdom

Steve W. J. Lin

Florida International University (FIU) - School of Accounting ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Arun J. Prakash

affiliation not provided to SSRN ( email )

Chun-Hao Chang

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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