Wait, What? The Consequences of Not Disclosing Feedback-Stimulating Information

63 Pages Posted: 23 Feb 2022

See all articles by Tanja Keeve

Tanja Keeve

Frankfurt School of Finance & Management - Accounting Department

Matthias Lassak

Aarhus University; Danish Finance Institute

Date Written: February 17, 2022

Abstract

Recent evidence suggests that managers use voluntary CAPEX guidance to stimulate market feedback by incentivizing informed trading in their stock prices. We show a related decrease in nondisclosing firms' informed trading measures. The reduction in informed trading is pronounced in unexpected nondisclosure, consistent with the interpretation that traders perceive nondisclosure as indicating low gains from informed trading. Less informed trading is associated with a reduction in investment-q sensitivity and future performance for nondisclosing firms. Overall, we document a novel link between managers' strategic disclosure decisions, the feedback channel, and real effects.

Keywords: Voluntary Disclosure, Feedback Disclosure, Unexpected Nondisclosure, Informed Trading, Real Effects

JEL Classification: D82, G14, G31, M41

Suggested Citation

Keeve, Tanja and Lassak, Matthias, Wait, What? The Consequences of Not Disclosing Feedback-Stimulating Information (February 17, 2022). TRR 266 Accounting for Transparency Working Paper Series No. 77, Available at SSRN: https://ssrn.com/abstract=4040976 or http://dx.doi.org/10.2139/ssrn.4040976

Tanja Keeve (Contact Author)

Frankfurt School of Finance & Management - Accounting Department ( email )

Adickesallee 32-34
Frankfurt, 60322
Germany

Matthias Lassak

Aarhus University ( email )

Fuglesangs Allé 4
Aarhus, 8210
Denmark

Danish Finance Institute ( email )

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