How Often Do Managers Withhold Information?

52 Pages Posted: 7 Mar 2016 Last revised: 15 Aug 2019

See all articles by Jeremy Bertomeu

Jeremy Bertomeu

Washington University in St. Louis - John M. Olin Business School

Paul Ma

University of Minnesota

Ivan Marinovic

Graduate School of Business, Stanford University

Date Written: August 12, 2019

Abstract

We estimate a dynamic model of voluntary disclosure, using annual management forecasts of earnings, that features a manager with price motives and an uncertain but persistent information endowment. Our estimates imply that: (i) managers face disclosure frictions 35% of the time; (ii) conditional on being informed, managers withhold information 17% of the time; and (iii) conditional on being silent, managers possess information 24% of the time. Managers’ strategic withholding motives increase investors’ uncertainty about earnings by 3%. We find that managers’ price motives reduce strategic withholding by one-third, in response to investors’ increased skepticism in the event of non-disclosure.

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

JEL Classification: D82, D83, G17

Suggested Citation

Bertomeu, Jeremy and Ma, Paul and Marinovic, Ivan, How Often Do Managers Withhold Information? (August 12, 2019). Available at SSRN: https://ssrn.com/abstract=2741778 or http://dx.doi.org/10.2139/ssrn.2741778

Jeremy Bertomeu (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
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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