Economic Recessions, Financial Disclosure, and Market Response: Evidence from Form 10-K, 10-Q, and Earnings Call Transcripts 

50 Pages Posted: 20 Sep 2024

See all articles by Dong-Jie Fang

Dong-Jie Fang

National Chengchi University (NCCU) - Department of Money and Banking

Hsing-Hua Chang

National Chengchi University (NCCU)

Shih-Kuei Lin

National Chengchi University (NCCU)

Carl R. Chen

University of Dayton

Date Written: July 12, 2024

Abstract

This paper examines how market responses to corporate's disclosures about economic recessions triggered by events such as SARS, the 2008 subprime crisis, and the COVID-19 pandemic. Based on the Management's Discussion and Analysis (MD&A) section in the 10-K and 10-Q filings and the earnings calls transcripts of listed stocks in the U.S. market, we constructed three disclosure variables, conditional exposure, conditional sentiment, and conditional risk. Empirical results show that the disclosure measures in 10-K & 10-Q filings have different impacts on post-release returns from those in earnings calls. We further explore the causes of this difference through three decompositions. Different from prior research, we find that when discussing economic recessions, the market more reacts to management's narratives than analysts' questions during earnings calls. Nevertheless, analysts do bring up significant risks during the questioning process. On the other hand, management may obscure risk-related information in the earnings calls, reducing its negative impact on stock returns.

Keywords: Financial information disclosure, Economic recession, Market response, Financial reports, Earnings call

Suggested Citation

Fang, Dong-Jie and Chang, Hsing-Hua and Lin, Shih-Kuei and Chen, Carl R., Economic Recessions, Financial Disclosure, and Market Response: Evidence from Form 10-K, 10-Q, and Earnings Call Transcripts  (July 12, 2024). Available at SSRN: https://ssrn.com/abstract=4961716 or http://dx.doi.org/10.2139/ssrn.4961716

Dong-Jie Fang (Contact Author)

National Chengchi University (NCCU) - Department of Money and Banking ( email )

No. 64, Sec. 2, Zhinan Rd.
Wenshan Dist.
Taipei, 11605
Taiwan
(886) 909712701 (Phone)

Hsing-Hua Chang

National Chengchi University (NCCU) ( email )

Shih-Kuei Lin

National Chengchi University (NCCU)

Carl R. Chen

University of Dayton ( email )

300 College Park
Dayton, OH 45469-2251
United States
937-229-2418 (Phone)
937-229-2477 (Fax)

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