The forward-looking disclosures of corporate managers : theory and evidence / Reint E. Gropp, Rasa Karapandza, Julian Opferkuch
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Discovery
863525431
URN
urn:nbn:de:gbv:3:2-59323
DOI
ISBN
ISSN
Autorin / Autor
Beiträger
Körperschaft
Erschienen
Halle (Saale), Germany : Halle Institute for Economic Research (IWH), July 2016
Umfang
1 Online-Ressource (43 Seiten, 0,64 MB)
Ausgabevermerk
Sprache
eng
Anmerkungen
Inhaltliche Zusammenfassung
We consider an infinitely repeated game in which a privately informed, long-lived manager raises funds from short-lived investors in order to finance a project. The manager can signal project quality to investors by making a (possibly costly) forward-looking disclosure about her project's potential for success. We find that if the manager's disclosures are costly, she will never release forward-looking statements that do not convey information to external investors. Furthermore, managers of firms that are transparent and face significant disclosure-related costs will refrain from forward-looking disclosures. In contrast, managers of opaque and profitable firms will follow a policy of accurate disclosures. To test our findings empirically, we devise an index that captures the quantity of forward-looking disclosures in public firms' 10-K reports, and relate it to multiple firm characteristics. For opaque firms, our index is positively correlated with a firm's profitability and financing needs. For transparent firms, there is only a weak relation between our index and firm fundamentals. Furthermore, the overall level of forward-looking disclosures declined significantly between 2001 and 2009, possibly as a result of the 2002 Sarbanes-Oxley Act.
Schriftenreihe
IWH-Diskussionspapiere ; no. 25/2016 ppn:837399270