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Voluntary Disclosures and Analyst Feedback

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  • NISAN LANGBERG
  • K. SIVARAMAKRISHNAN

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.

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
    DOI: 10.1111/j.1475-679X.2009.00360.x
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    Cited by:

    1. Praveen Kumar & Nisan Langberg & K. Sivaramakrishnan, 2012. "Voluntary Disclosures, Corporate Control, and Investment," Journal of Accounting Research, Wiley Blackwell, vol. 50(4), pages 1041-1076, September.
    2. Frenkel, Sivan & Guttman, Ilan & Kremer, Ilan, 2020. "The effect of exogenous information on voluntary disclosure and market quality," Journal of Financial Economics, Elsevier, vol. 138(1), pages 176-192.
    3. Jeremy Bertomeu & Edwige Cheynel, 2015. "Asset Measurement in Imperfect Credit Markets," Journal of Accounting Research, Wiley Blackwell, vol. 53(5), pages 965-984, December.
    4. Lee, Ye Ji, 2021. "The effects of analysts’ tax expense forecast accuracy on corporate tax avoidance: An international analysis," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(2).
    5. Jihun Bae & Gary C. Biddle & Chul W. Park, 2022. "Managerial Learning from Analyst Feedback to Voluntary Capex Guidance, Investment Efficiency, and Firm Performance," Management Science, INFORMS, vol. 68(1), pages 583-607, January.
    6. Davide Cianciaruso & Sri S. Sridhar, 2018. "Mandatory and Voluntary Disclosures: Dynamic Interactions," Journal of Accounting Research, Wiley Blackwell, vol. 56(4), pages 1253-1283, September.
    7. James C. Brau & James Cicon & Stephen R. Owen, 2022. "A Textual Analysis of Logograms in Chinese IPO Roadshows: How Agreement between Investors and Management Relates to Pricing and Performance," IJFS, MDPI, vol. 10(2), pages 1-24, April.
    8. Praveen Kumar & Nisan Langberg & K. Sivaramakrishnan, 2016. "Voluntary Disclosure with Informed Trading in the IPO Market," Journal of Accounting Research, Wiley Blackwell, vol. 54(5), pages 1365-1394, December.
    9. 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.
    10. Anil Arya & Ram N. V. Ramanan, 2023. "Endogenizing Discretion in Disclosures," Management Science, INFORMS, vol. 69(6), pages 3730-3747, June.
    11. Lin Peng & Siew Hong Teoh & Yakun Wang & Jiawen Yan, 2022. "Face Value: Trait Impressions, Performance Characteristics, and Market Outcomes for Financial Analysts," Journal of Accounting Research, Wiley Blackwell, vol. 60(2), pages 653-705, May.
    12. Tim Martens & Christoph J. Sextroh, 2021. "Analyst Coverage Overlaps and Interfirm Information Spillovers," Journal of Accounting Research, Wiley Blackwell, vol. 59(4), pages 1425-1480, September.
    13. Konrad Lang, 2018. "Voluntary Disclosure and Analyst Forecast," European Accounting Review, Taylor & Francis Journals, vol. 27(1), pages 23-36, January.
    14. Huang, Kelly, 2020. "Management forecast errors and corporate investment efficiency," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(3).
    15. Goldman, Eitan & Martel, Jordan & Schneemeier, Jan, 2022. "A theory of financial media," Journal of Financial Economics, Elsevier, vol. 145(1), pages 239-258.
    16. Singh, Rajdeep & Yerramilli, Vijay, 2014. "Market efficiency, managerial compensation, and real efficiency," Journal of Corporate Finance, Elsevier, vol. 29(C), pages 561-578.
    17. 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.
    18. Arya, Anil & Ramanan, Ram N.V., 2024. "Long-term firm gains from short-term managerial focus: Myopia and voluntary disclosures," Journal of Accounting and Economics, Elsevier, vol. 77(2).
    19. Kumar, Praveen & Langberg, Nisan & Oded, Jacob & Sivaramakrishnan, K., 2017. "Voluntary disclosure and strategic stock repurchases," Journal of Accounting and Economics, Elsevier, vol. 63(2), pages 207-230.
    20. 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.
    21. Philip Bond & Alex Edmans & Itay Goldstein, 2012. "The Real Effects of Financial Markets," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 339-360, October.

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