The Role of Asymmetric Disclosure When Price Efficiency Affects Real Efficiency

46 Pages Posted: 25 Apr 2018 Last revised: 8 Aug 2018

See all articles by Qi Chen

Qi Chen

Duke University - Fuqua School of Business

Zeqiong Huang

Yale School of Management

Xu Jiang

Duke University

Gaoqing Zhang

University of Minnesota

Yun Zhang

George Washington University

Date Written: August 6, 2018

Abstract

We examine the effects of asymmetric disclosure of good and bad news on price We examine the effects of asymmetric disclosure of good vs. bad news on price informativeness when prices provide useful information to assist firms’ investment decisions. We find that more timely disclosure of negative news encourages speculators to trade on their private information which in turn improves the efficiency of firms’ investment decisions. We also identify conditions under which the preferences for timely loss disclosure differ between a firm whose objective is to maximize ex ante firm value and a social planner whose objective is to maximize investment efficiency. Our analysis provides an alternative economic explanation for asymmetric timeliness in accounting disclosure.

Keywords: Timely loss recognition; Price informativeness; Feedback effect

JEL Classification: M41, G14, G30

Suggested Citation

Chen, Qi and Huang, Zeqiong and Jiang, Xu and Zhang, Gaoqing and Zhang, Yun, The Role of Asymmetric Disclosure When Price Efficiency Affects Real Efficiency (August 6, 2018). Available at SSRN: https://ssrn.com/abstract=3157447 or http://dx.doi.org/10.2139/ssrn.3157447

Qi Chen

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
(919) 660-7753 (Phone)

Zeqiong Huang

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Xu Jiang

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Gaoqing Zhang

University of Minnesota ( email )

321 19th Avenue South
Minneapolis, MN 55455
United States

Yun Zhang (Contact Author)

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

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