Three essays on the determinants of firms’ disclosure decisions

Abstract

This dissertation consists of three essays on the determinants of firms’ disclosure decisions. The first determinant is the blockholder exit threat. In a model where blockholders can signal their private information to the market by selling their shares, such blockholders are shown to lead management to reveal more public information even in the absence of any intervention. Consistently, firms with new blockholders without an intent to intervene (13G filers) experience more increase in voluntary 8-K items than propensity score-matched firms without any new blockholders do. The effect of blockholders is stronger for more liquid firms with more credible exit threats. The second determinant is the disclosure timing. In the dynamic voluntary disclosure model that extends Dye (1985) and Jung and Kwon (1988), there exists a unique equilibrium in which the stock-price maximizing manager discloses information at each period if and only if his signal is above a threshold level. Such thresholds strictly decrease with time. A sample of voluntary managerial earnings guidance reveals: (i) analysts revise their evaluation of the asset downwards in the absence of disclosure

(ii) news content of disclosures tends to become more negative over time

(iii) holding the news realization constant, the market response to disclosure is more positive the more time has passed since the prior disclosure. The third determinant is the earnings comparability among industry peers, which is examined in the context of fiscal year-end choices of Japanese firms. Consistent with better comparability among firms with the prevailing March-ends, their stock returns are more positively related to industry earnings compared to individual earnings. There is also evidence that December-end firms enjoy better comparability with peers outside Japan. March ends are more frequent among large, low market-to-book firms while December ends are positively associated with foreign sales and foreign ownership.