Disclosure Frequency Induced Myopia and the Decision to be Public
53 Pages Posted: 6 Feb 2017 Last revised: 14 Sep 2017
Date Written: September 2017
This study examines whether disclosure frequency induced myopia influences the types of firms that go public and their choice of listing exchanges if they decide to do so. We find that the incentive to stay private in order to avoid disclosure frequency induced myopia creates a downward kink in the relation between the length of the cash conversion cycle and the proportion of public firms at the industry level around the time frame that corresponds to the mandatory reporting interval. Second, at the firm level, public firms with longer cash conversion cycles relative to industry peers are more likely to list on exchanges that require less frequent mandatory disclosure to minimize disclosure frequency induced myopia. Furthermore, when the mandatory reporting frequency increased from semi-annual to quarterly, we observe a sharper decline in the percentage of public firms from industries whose cash conversion cycles are between one quarter and two quarters relative to those from other industries both in the United States and in the United Kingdom.
Keywords: managerial myopia, mandatory disclosure frequency, investor impatience
JEL Classification: M41, G32, G34
Suggested Citation: Suggested Citation