Uncertainty and Disclosure

Prior research finds conflicting results on the impact of uncertainty on voluntary firm disclosure. Our paper sheds light on this relationship by addressing endogeneity concerns. To this end, we use a novel instrumentation strategy that exploits firms’ differential exposure to aggregate uncertainty shocks in currencies, energy and policy. We show that an increase in firm-level uncertainty increases the propensity of firms to issue management forecasts and the number of management forecasts disclosed. Cross-sectional tests suggest that firms with a commitment to guidance increase their disclosure to mitigate deteriorating information asymmetry following increased uncertainty