Forced Voluntary Disclosure

Abstract

Two–way communication via social media platforms allows the firm to make an initial disclosure decision and then revise it after observing the response on social media to its initial decision. We examine the pressures interactive communications place on disclosure choices and find that negative social pressure “forces” some firm types to respond and disclose information they initially did not disclose. The valuable option to revise reduces the probability of an initial disclosure. Further, an increase in the initial disclosure cost reduces the probability of an initial disclosure but increases the probability of a subsequent disclosure. Similarly, an increase in the cost of a subsequent disclosure increases the probability of an initial disclosure but decreases the probability of a subsequent disclosure. These effects are amplified if the firm is more likely to face social media pressure or if its value is more sensitive to it.