Abstract
We examine the effects of asymmetric timeliness in reporting good versus bad news on price informativeness when prices provide useful information to assist firms' investment decisions. We find that a reporting system featuring more timely disclosure of bad news than of good news encourages speculators to trade on their private information. Consequently, it generates a higher expected investment level and firm value. Our analysis generates predictions consistent with empirical findings and provides a justification for the more timely reporting of bad news in the absence of managerial incentive problems.
Original language | English (US) |
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Pages (from-to) | 5194-5208 |
Number of pages | 15 |
Journal | Management Science |
Volume | 67 |
Issue number | 8 |
DOIs | |
State | Published - Aug 2021 |
Bibliographical note
Publisher Copyright:© 2020 INFORMS.
Keywords
- Feedback effect
- Price informativeness
- Timely loss recognition