How Often Do Managers Withhold Information?

51 Pages Posted: 7 Mar 2016 Last revised: 29 Mar 2019

See all articles by Jeremy Bertomeu

Jeremy Bertomeu

University of California, San Diego (UCSD) - Rady School of Management

Paul Ma

University of Minnesota

Ivan Marinovic

Graduate School of Business, Stanford University

Date Written: March 23, 2019

Abstract

We estimate a dynamic model of voluntary disclosure featuring a manager with noisy price motives, and uncertain but persistent information endowment using annual management forecasts of earnings. Despite remaining silent nearly half the time, managers are estimated to strategically withhold forecasts in 11% of the periods, or about once every four non-disclosure events. Strategic withholding motives increase investors' uncertainty over earnings by 3%. Our estimates also suggest that managers receive disclosure benefits, consistent with disclosure mitigating litigation risks. In counterfactual exercises, we find that managers' price motives reduce strategic withholding by one third, in response to exacerbated investors' skepticism towards non-disclosure.

Keywords: persuasion, voluntary disclosure, information endowment, strategic withholding, structural estimation, disclosure cost

JEL Classification: D72, D82, D83, G20

Suggested Citation

Bertomeu, Jeremy and Ma, Paul and Marinovic, Ivan, How Often Do Managers Withhold Information? (March 23, 2019). Available at SSRN: https://ssrn.com/abstract=2741778 or http://dx.doi.org/10.2139/ssrn.2741778

Jeremy Bertomeu (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Paul Ma

University of Minnesota ( email )

19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://www.paulma.org

Ivan Marinovic

Graduate School of Business, Stanford University ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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