Are managers strategic in reporting non-earnings news? Evidence on timing and news bundling
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Using a comprehensive sample of non-earnings 8-K filings from 2005 to 2013, we examine whether firms strategically report mandatory and voluntary news. In particular, we examine whether firms report negative news when investor attention is low and whether they bundle positive and negative news. Our findings support the notion that managers believe in the existence of investor inattention and strategically report negative news after trading hours. These results particularly apply to public firms, where equity market pressures provide stronger incentives to mitigate market reaction to news by exploiting investor inattention. Further analysis of the market reaction to strategic disclosure uncovers no evidence of investor inattention, consistent with market efficiency. We also observe that public firms are more likely to strategically disclose through news bundling and that the likelihood of this increases with the likelihood of strategic disclosure through timing.
KeywordsSEC regulation Form 8-K Voluntary disclosure Mandatory disclosure Investor inattention
JEL ClassificationG14 G18 K22 M41 M48
A previous version of this paper was titled, “The Opportunistic Reporting of Material Events and the Apparent Misconception of Investors’ Reaction.” We thank seminar participants at INSEAD, Tel-Aviv University, Hebrew University, UC Davis, Baruch College, Hofstra University, Fordham University, Claremont McKenna College, and the 2013 SMU accounting symposium participants and discussant for helpful comments and suggestions. Financial support from the INSEAD R&D fund is gratefully acknowledged.
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