Be alert of the hyped words around fancy tech! Strategic digitalization disclosure under earnings pressure

We investigate whether managers conduct digitalization-related strategic disclosure when their firms are under earnings pressure based on a sample of Chinese listed companies. Our findings indicate that earnings pressure significantly increases corporate abnormal digitalization disclosure. Meanwhile, the inflated digitalization disclosure under earnings pressure is more pronounced for firms with greater market pressure, under weaker external monitoring, in industries where digitalization is of higher importance, and during the more recent years. Furthermore, our study reveals that more abnormal digitalization disclosure under earnings pressure indeed reduces negative investor reaction, validating the managerial incentive for this disclosure strategy. Our study serves as a caution to investors about the potential exaggeration of novel technology disclosure under certain circumstances.