Investor Horizon and Disclosure Policies

51 Pages Posted: 22 May 2018 Last revised: 29 Jun 2019

See all articles by Brian D. Cadman

Brian D. Cadman

University of Utah - David Eccles School of Business

Mirko Stanislav Heinle

University of Pennsylvania - Accounting Department

Daniele Macciocchi

University of Utah - David Eccles School of Business

Date Written: May 8, 2018

Abstract

We investigate the relation between investor horizon and disclosure policy. We develop and analyze a rational expectations model where the original investors commit to a disclosure policy. Counter to casual intuition, short-horizon investors prefer more disclosure and are willing to bear costs of disclosure to reduce information asymmetries among capital market participants. We empirically test our predictions in the setting of newly public firms and find that firms with short-horizon controlling investors disclose more than other firms and experience lower information asymmetry. Our study contributes to the understanding of firms' disclosure choices by suggesting that the horizon of controlling investors shapes a firm's disclosure policy.

Keywords: Investment Horizon, Voluntary Disclosure, Disclosure Policy, IPO

JEL Classification: M40, G14, G24

Suggested Citation

Cadman, Brian D. and Heinle, Mirko Stanislav and Macciocchi, Daniele, Investor Horizon and Disclosure Policies (May 8, 2018). Available at SSRN: https://ssrn.com/abstract=3175477 or http://dx.doi.org/10.2139/ssrn.3175477

Brian D. Cadman

University of Utah - David Eccles School of Business ( email )

1645 Campus Center Drive
Salt Lake City, UT 84112
United States
801-585-9517 (Phone)

HOME PAGE: http://www.business.utah.edu/bio/briancadman

Mirko Stanislav Heinle (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Daniele Macciocchi

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

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