25 Jahre IWH

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The Forward-looking Disclosures of Corporate Managers: Theory and Evidence

We consider an infinitely repeated game in which a privately informed, long-lived manager raises funds from short-lived investors in order to finance a project. The manager can signal project quality to investors by making a (possibly costly) forward-looking disclosure about her project’s potential for success. We find that if the manager’s disclosures are costly, she will never release forward-looking statements that do not convey information to external investors. Furthermore, managers of firms that are transparent and face significant disclosure-related costs will refrain from forward-looking disclosures. In contrast, managers of opaque and profitable firms will follow a policy of accurate disclosures. To test our findings empirically, we devise an index that captures the quantity of forward-looking disclosures in public firms’ 10-K reports, and relate it to multiple firm characteristics. For opaque firms, our index is positively correlated with a firm’s profitability and financing needs. For transparent firms, there is only a weak relation between our index and firm fundamentals. Furthermore, the overall level of forward-looking disclosures declined significantly between 2001 and 2009, possibly as a result of the 2002 Sarbanes-Oxley Act.

20. Juli 2016

Autoren Reint E. Gropp Rasa Karapandza Julian Opferkuch

Professor Reint E. Gropp, Ph.D.

Über den Autor

Professor Reint E. Gropp, Ph.D.

Seit November 2014 hat Reint E. Gropp das Amt des Präsidenten des IWH inne und ist Inhaber eines Lehrstuhls für Volkswirtschaftslehre an der Otto-von-Guericke-Universität Magdeburg. Er ist Fellow des Center for Financial Studies, Frankfurt, und Mit-Herausgeber des Review of Finance. Als Berater ist er unter anderem für die Bank of Canada und die Federal Reserve Bank of San Francisco tätig.

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