Feedback Effect of Disclosure Spillovers

Prior research has documented the existence of disclosure externalities, or information spillovers, between firms in a number of different settings. The idea is that when two firms are economically related, public disclosures by one firm can affect the stock price of the other firm. In a recent paper, we extend this idea by asking whether firms make disclosure decisions with the intention of affecting other firms’ stock prices. That is, we examine whether the presence of information spillovers influences firms’ disclosure decisions.

We investigate our question in the context of cash-based mergers and acquisitions. We test whether bidders disclose information … Read more