Panda Games: Corporate Disclosure in the Eclipse of Search

71 Pages Posted: 8 Dec 2017 Last revised: 13 Jan 2020

See all articles by Kemin Wang

Kemin Wang

Fudan University - School of Management

Xiaoyun Yu

Indiana University - Kelley School of Business - Department of Finance; China Academy of Financial Research (CAFR)

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen

Date Written: January 10, 2020

Abstract

We show that firms strategically alter their disclosure behavior when investors’ access to information via search engines is interrupted. We conduct a textual analysis and exploit an exogenous event—Google’s 2010 surprising withdrawal from mainland China, which significantly hampered domestic investors’ ability to search for foreign information but did not affect their access to domestic information. Following Google’s exit, Chinese firms’ announcements on their foreign transactions become more bullish in comparison to similar announcements prior to the exit and to those that involve only domestic transactions. This effect is mitigated in the presence of foreign investors or analysts affiliated with foreign brokers, who are not subject to foreign information censorship by the Chinese government. Moreover, compared to those that operate domestically, firms with foreign operations issue rosier annual reports and manage earnings to a greater extent after Google’s departure; their stock prices also become less informative. These optimistic announcements or annual reports allow insiders to sell more shares at a higher price.

Keywords: Strategic Disclosure, Textual Analysis, Tone Management, Google

JEL Classification: G3, D80, L86

Suggested Citation

Wang, Kemin and Yu, Xiaoyun and Zhang, Bohui, Panda Games: Corporate Disclosure in the Eclipse of Search (January 10, 2020). Kelley School of Business Research Paper No. 18-2. Available at SSRN: https://ssrn.com/abstract=3083995 or http://dx.doi.org/10.2139/ssrn.3083995

Kemin Wang

Fudan University - School of Management ( email )

No. 670, Guoshun Road
Shanghai, 200433
China

Xiaoyun Yu

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3521 (Phone)
812-855-5875 (Fax)

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

Bohui Zhang (Contact Author)

The Chinese University of Hong Kong, Shenzhen ( email )

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