How Often Do Managers Withhold Information?

57 Pages Posted: 7 Mar 2016 Last revised: 18 Oct 2018

Jeremy Bertomeu

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

Paul Ma

University of Minnesota

Ivan Marinovic

Stanford Graduate School of Business

Date Written: October 13, 2018

Abstract

We structurally estimate a model of voluntary disclosure with uncertain information endowment (Dye 1985; Jung and Kwon 1988; Einhorn and Ziv, 2008) using management forecasts of earnings. Our estimates reveal that managers possess private information which is able to explain 18% of the variation in earnings surprises, 6 months prior to the end of the fiscal reporting period. Despite remaining silent nearly half the time, managers only strategically withhold in 11% of the cases. In counter-factual analysis we find that i) withholding increases investors' uncertainty over earnings by 5% and ii) manager's stock price motives decrease the likelihood of strategic withholding by about one fifth. Our model captures a number of empirical facts and quantifies the consequences of changes in the reporting environment in various counter-factual analyses.

Keywords: persuasion, voluntary, disclosure, structural estimation

JEL Classification: D72, D82, D83, G20

Suggested Citation

Bertomeu, Jeremy and Ma, Paul and Marinovic, Ivan, How Often Do Managers Withhold Information? (October 13, 2018). 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

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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