Watching from the Sky: Business Observability and Voluntary Disclosure

Posted: 12 Aug 2022

See all articles by Clark Liu

Clark Liu

Tsinghua University - PBC School of Finance

Yancheng Qiu

Hong Kong University of Science & Technology (HKUST)

Shujing Wang

Tongji University

P. Eric Yeung

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: November 1, 2020

Abstract

Exploiting the staggered releases of satellite data on parking lot traffic across U.S. retailers, we study how improved business observability affects corporate voluntary disclosure. We document that following satellite traffic data release, firms significantly suppress issuing management forecasts, especially good news forecasts. This result is best explained by managers’ incentives to avoid missing their own earnings “guidance” after business observability improves. Consistent with this explanation, we document that good news forecast suppression is stronger among quarterly guidance than long-term forecasts, and is more pronounced when firms have higher institutional ownership, higher operating uncertainty, or higher expected litigation risk. When managers decide to issue good news forecasts, these forecasts also become more qualitative.

Keywords: Satellite Data, Business Observability, Voluntary Disclosure, Management Forecasts, Earnings Targets

JEL Classification: G30; M41

Suggested Citation

Liu, Clark and Qiu, Yancheng and Wang, Shujing and Yeung, P. Eric, Watching from the Sky: Business Observability and Voluntary Disclosure (November 1, 2020). Available at SSRN: https://ssrn.com/abstract=4186506

Clark Liu (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Yancheng Qiu

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Shujing Wang

Tongji University ( email )

Shanghai
China

P. Eric Yeung

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
79
PlumX Metrics