We investigated disclosure decisions by identifying a circumstance, the spin-off of a segment, where the benefits of disclosure should outweigh the costs. We compared the valuation revisions associated with spin-off announcements of firms with previous line of business disclosures to valuation revisions of firms making spin-off announcements without these disclosures. We found significant stock price increases associated with the spin-off announcement regardless of prior segment disclosure history. We also found, however, that the stock price increases were temporary for firms without prior segment disclosures, while the valuation revisions for firms with previous line-of-business disclosure information persisted. Copyright Springer Science + Business Media, Inc. 2005
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Loughran, Tim & Ritter, Jay R, 1995.
" The New Issues Puzzle,"
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American Finance Association, vol. 50(1), pages 23-51, March.
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