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

Intertemporal Variation in the Externalities of Peer-Firm Disclosures

One of the primary rationales in favor of regulating disclosure is that more information may create positive externalities, or spillover effects, by helping investors learn about industry- or economy-wide trends and growth opportunities. In this way, a firm’s public disclosures informs investors not only about that specific firm’s prospects, but also about the prospects of related, peer firms. Thus, the more firms within an industry disclosing regular, publicly available information, the less uncertainty exists among investors regarding the value of all firms in that industry. Although the idea is intuitive, it has been difficult to empirically examine the existence of … Read more