Abstract
Security regulators charge firms with providing material information about intangible investments to outside investors. Among the many firms that do not report their advertising, 25% are in the top decile of observed advertising. We find that relying on managerial judgment for disclosure replaces transparent, regulatory thresholds, such as 1% of sales, with opaque, auditor-specific minimums (e.g., EY vs. Deloitte). Forced and voluntary auditor changes lead firms to alter advertising disclosures. Financial analysts ask executives of hidden advertising firms 65% fewer questions about advertising than their reporting peers. Our final tests demonstrate that hidden advertising is associated with stock mispricing.
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