Voluntary Disclosure with Uncertainty of Investors' Response: Evidence from M&A Conference Calls

Abstract

We examine the voluntary disclosure theory’s prediction of heterogeneous stock market reaction to M&A conference calls attributable to the uncertainty of investors’ response. Using a series of quantile regressions, we find that the incidence of conference calls is associated with both extremely negative and extremely positive M&A announcement abnormal returns. We find that this heterogeneous stock market reaction occurs for both low and high levels of words/ forward-looking words. Furthermore, the heterogeneous stock market reaction is substantially weaker when M&A conference calls are held after the firms observe the initial market reaction to the M&A press release. These results are robust to a battery of robustness tests. Collectively, the findings support the uncertainty of investors’ response to voluntary disclosures that can be perceived by investors as very good or very bad news, as an important factor for examining the valuation implications of voluntary disclosures.