Does Firm-specific Disclosure Help Resolve Uncertainty Around Macroeconomic Announcements?

Abstract

We examine whether timely firm-level earnings news complements subsequent macroeconomic news to help resolve investor uncertainty. We find that when firms announce earnings in the 30 days prior to a Federal Open Market Committee (FOMC) release, they experience a significantly larger decrease in implied volatility around the release. This effect is more pronounced for firms that face greater exposure to policy uncertainty, are more financially constrained, or have greater investment opportunities. We further find that there is a greater reduction of uncertainty when the earnings call contains more macroeconomic content. Additional analysis shows that these firms also experience an increase in EDGAR downloads around FOMC announcements. Taken together, the results suggest that timely earnings announcements convey useful information that complements subsequent macroeconomic news in resolving investor uncertainty, thereby highlighting a benefit of firm-specific disclosure that has been largely unexplored.

Keywords: disclosure, earnings announcement; uncertainty; implied volatility; monetary policy; macroeconomic announcements, FOMC, investor uncertainty, information processing