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Voluntary Disclosures and Analyst Feedback

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  • NISAN LANGBERG
  • K. SIVARAMAKRISHNAN

Abstract

ABSTRACT 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". Copyright (c), University of Chicago on behalf of the Accounting Research Center, 2009.

Suggested Citation

  • Nisan Langberg & K. Sivaramakrishnan, 2010. "Voluntary Disclosures and Analyst Feedback," Journal of Accounting Research, Wiley Blackwell, vol. 48(3), pages 603-646, June.
  • Handle: RePEc:bla:joares:v:48:y:2010:i:3:p:603-646
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    Cited by:

    1. Singh, Rajdeep & Yerramilli, Vijay, 2014. "Market efficiency, managerial compensation, and real efficiency," Journal of Corporate Finance, Elsevier, vol. 29(C), pages 561-578.
    2. repec:eee:jaecon:v:63:y:2017:i:2:p:207-230 is not listed on IDEAS
    3. Cox, Raymond A.K. & Dayanandan, Ajit & Donker, Han, 2016. "The Ricochet Effect of Bad News," The International Journal of Accounting, Elsevier, vol. 51(3), pages 385-401.
    4. Dayanandan, Ajit & Donker, Han & Karahan, Gökhan, 2017. "Do voluntary disclosures of bad news improve liquidity?," The North American Journal of Economics and Finance, Elsevier, vol. 40(C), pages 16-29.
    5. George Emmanuel Iatridis, 2012. "Voluntary IFRS disclosures: evidence from the transition from UK GAAP to IFRSs," Managerial Auditing Journal, Emerald Group Publishing, vol. 27(6), pages 573-597, June.

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