Voluntary Disclosure by Shareholders

Abstract

Disclosure research has long centered on the economic consequences of disclosures released by firms to shareholders. In this study, we extend this literature by showing that large activist shareholders release disclosures that are associated with significant stock price movements and decreased investor information asymmetry. These disclosures are also leading indicators of key activist-campaign outcomes, including proxy contests, directorships, and proxy advisor recommendations. These findings suggest that activists release disclosures for the purpose of facilitating change at the target firm and informing other investors. We also find that managers respond to activist disclosures through increased disclosure of their own. Our findings are consistent across a variety of specifications and are validated by several placebo tests. We conclude that activist disclosures are an important but understudied component of firms' information environments and managers' disclosure decisions.

Keywords: Corporate Governance, Information Asymmetry, Shareholder Activism, Voluntary Disclosure

JEL Classification: D21, G30, G32, G34, K22, L22