The Pros and Cons of Disclosing News in Distressed Organizations

Regulation affecting managers’ disclosure of news in U.S. organizations has been affected by three main changes over the past three decades: (a) The Private Securities Litigation Reform (PSLR) Act, 1995, which protected managers from litigation arising from the disclosure of forecasted numbers that didn’t turn out to be accurate, (b) Regulation Fair Disclosure (Reg F.D.), adopted by the Securities and Exchange Commission (SEC) in 2000, which stopped managers from disclosing news to a select group of people, and (c) Sarbanes-Oxley Act (SOX), 2002, which expanded the scope, accuracy, and completeness of disclosures to stakeholders.

Managers tend to either withhold news, … Read more