Strategic Disclosure and Stock Returns: Theory and Evidence from US Cross-Listing
When a firm exercises discretion to disclose or withhold information (strategic disclosure), risk-averse investors command higher expected returns when expected cash flows decrease, producing a negative correlation between these expectations. Moreover, stock returns exhibit stronger reversal than they do when full disclosure is enforced. We propose a model that makes these predictions and provide consistent evidence using a panel of foreign firms that list American Depositary Receipts (ADRs). We find significant shifts in the time-series properties of stock returns for firms that undergo large changes in disclosure environments, such as those cross-listing on the NYSE/AMEX/NASDAQ and those from less-developed/emerging markets and code-law countries. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.
Year of publication: |
2009
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Authors: | Goto, Shingo ; Watanabe, Masahiro ; Xu, Yan |
Published in: |
Review of Financial Studies. - Society for Financial Studies - SFS. - Vol. 22.2009, 4, p. 1585-1620
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Publisher: |
Society for Financial Studies - SFS |
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