Does Local Investors' Attention Encourage Management Voluntary Disclosure?

Abstract

I find that local investors, compared to nonlocal investors, significantly change the way through which they acquire information on the SEC EDGAR around earnings announcements. Local investors on average further increase the amount of information gathering starting approximately two weeks ahead of the earnings announcements. Both local and nonlocal investors access local firms filings further in time around earnings announcements, but the increase in historical archival research on EDGAR is more pronounced for local investors. Since investors profit more from knowing information others don’t know (Nieuwerburgh and Veldkamp [2009]), local investors information acquisition is positively correlated with the information advantage they already possessed. I thus use this structural shift of local investors’ information gathering around earnings announcements to proxy for the degree to which local investors are aware of firms’ private information arrival. Consistent with Dye (1998) and Fishman and Hagerty (2003), I find the amount of local firms’ good news management guidance and 8-K filings following earnings announcements is increasing in the intensity of local investors’ information acquisition around the earnings announcements.