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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27874
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| Title: | Endogenous Information Flows and the Clustering of Announcements |
| Authors: | Acharya, Viral
DeMarzo, Peter
Kremer, Ilan |
| Issue Date: | 6-Feb-2009 |
| Series/Report no.: | FIN-08-028 |
| Abstract: | We consider the release of information by a firm when the manager has
discretion regarding the timing of its release. While it is well known
that firms appear to delay the release of bad news, we examine how
external information about the state of the economy (or the industry)
affects this decision. We develop a dynamic model of strategic
disclosure in which a firm may privately receive information at a time
that is random (and independent of the state of the economy). Because
investors are uncertain regarding whether and when the firm has received
information, the firm will not necessarily disclose the information
immediately. We show that bad news about the economy can trigger the
immediate release of information by firms. Conversely, good news about
the economy can slow the release of information by firms. As a result,
the release of negative information tends to be clustered. Surprisingly,
this result holds only when firms can preempt the arrival of external
information by disclosing their own information first. These results
have implications for conditional variance and skewness of stock and
market returns. |
| URI: | http://hdl.handle.net/2451/27874 |
| Appears in Collections: | Finance Working Papers
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