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Voluntary Disclosures and Analyst Feedback
Author(s) -
LANGBERG NISAN,
SIVARAMAKRISHNAN K.
Publication year - 2010
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/j.1475-679x.2009.00360.x
Subject(s) - voluntary disclosure , business , stock (firearms) , value (mathematics) , quality (philosophy) , stock price , accounting , turnover , monetary economics , microeconomics , economics , computer science , mechanical engineering , paleontology , philosophy , management , epistemology , machine learning , series (stratigraphy) , engineering , biology
We study the resource allocation role of voluntary disclosures when feedback from financial markets is potentially useful to managers in undertaking value maximizing actions. Managers weigh the short‐term price implications of disclosure against the long‐term efficiency gains due to feedback while financial analysts strategically produce information. The model can explain why managers disclose bad information (e.g., grim outlook), that reduces the stock price, and why prices respond more strongly to bad news relative to good news. We find that not all firms enjoy the same quality of feedback, and that feedback, by itself, does not induce more disclosure but less .