How Often Do Managers Withhold Information?
51 Pages Posted: 7 Mar 2016 Last revised: 29 Mar 2019
Date Written: March 23, 2019
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: Suggested Citation