Negative Disclosure Research Articles

Does negative information in MD&A can reduce stock crash risk?

Purpose As an important part of the disclosure of listed companies' annual reports, MD&A will disclose some "bad news" about the company. The purpose of this paper is to study whether such "bad news" can reduce information asymmetry and alleviate the risk of stock price crash remains to be seen. Design/methodology/approach Based on the sample of A-share listed companies from 2007 to 2016, the authors examine whether the negative information in MD&A could reduce stock price crash risk. Findings It is found that the negative information in MD&A does not reduce future crash, which indicates that the negative information in MD&A does not alleviate the information asymmetry. Further, it is also found this is due to the low readability of negative information which leads to the negative information not successfully released into the market timely. Only highly readable negative information can alleviate information asymmetry and suppress crash risk. In addition, the authors also find in the companies with more investor surveys negative tone is negatively correlated with crash risk, which means that investor surveys could help investors interpret the negative information in MD&A and alleviate stock price crash risk. Practical implications The practical significance of this article: this paper suggests that investors should carefully identify the quality of negative information in MD&A and pay attention to other quality characteristics besides credibility. This paper suggests that the regulator should pay attention not only to whether to disclose and the amount of disclosure but also to the quality of information disclosure, such as readability, so as to restrict management's strategic behavior in information disclosure. Originality/value First, different from previous studies on the impact of information disclosure on crash risk, this paper directly explores the impact of information in MD&A on stock price crash risk from the perspective of negative information disclosure that management most want to hide. It supplements the literature on the impact of information disclosure on stock price crash risk. Second, this paper studies the interaction between information tone and readability and its impact on the risk of stock price crash. Some studies believe that the credibility of negative news is higher and investors' reaction may be stronger. However, this paper finds that the disclosure of negative information may not be absorbed by the market because of the low readability. Third, this paper finds that investor surveys can help information users to interpret negative information and alleviate the risk of stock price crash, which shows that information disclosure of different channels will complement each other and improve information efficiency. Therefore, it advocates different information disclosure channels which has important practical significance for improving market pricing efficiency and reducing investment decision-making risk.

Strategic Disclosure of Disruptions and Firm Stock Performance – An Event Study

Companies’ announcements are a signal to the market of their strategic decisions and intentions. Some firms create “strategic noise” to mitigate the effects of potentially negative disclosures by dampening any negative news with some important but unrelated information. This study examines the effects of the timing of supply chain disruption announcements on a firm’s stock performance. The results of our analysis are based on a sample of 29 companies which made announcements of supply chain disruptions that affected their operations between 2016 - 2018. We employ an event study methodology and examine the abnormal returns of companies in our sample to determine if the event – the supply chain disruption had an effect of the firm’s stock price. Our findings, although statistically insignificant, indicate that the timing of announcements does have an effect on a firm’s stock performance. We found that companies in our sample experienced positive abnormal returns relative to announcing an event and reporting a supply chain disruption. This study also examines whether the composition of a firm’s top management team (TMT) and its reputation in the market mitigate the effects of any announcements of a supply chain disruption. Our study contributes to the operations and supply chain management literature by advancing the integrated and contingency and signaling theoretical framework through which we examine these phenomena.

Collective Bargaining and Strategic Disclosure in Earnings Conference Calls

Prior studies provide extensive evidence that unionized firms tend to have more negative disclosure than non-unionized firms do. These studies interpret this behavior as managers of unionized firms manipulating disclosure to gain an advantage in collective bargaining but do not directly test this assumption. An alternative explanation is that unionized firms disclose truthfully on their union-deflated prospects. Using measures that are specifically designed to capture deceptive behaviors, we find that (1) managers of unionized firms tend to script their answers in conference calls to a greater extent when union-related proprietary costs are higher, (2) unionized firm managers actively cast earnings calls with unfavorable analysts before labor negotiations, (3) when union-related proprietary costs are higher, a larger share of managers’ negative language occurs in sentences with linguistic cues of deception, (4) when the firms have weak unions and operate in states with Right-to-Work laws, managers tend to be “truth-tellers,” and (5) managers of unionized firms use scripting and deceptively negative language, but not casting, more often than managers of non-unionized firms. Our findings provide confirmatory evidence that unionized firms manipulate disclosure to mitigate union-related proprietary costs. However, we also find that there are subsets of unionized firms that disclose truthfully.

Investigating the level and quality of the information in the environmental disclosure report of a corporation considering government intervention

We study the effect of quantity and quality of environmental disclosure of a corporation, and also assess the impact of government intervention through subsidies on the corporation. Both positive and negative information levels and respective subsidies, and three different government policies (i.e., environmental policy, disclosure benefit policy, and social welfare policy) are considered. The resulting interaction between the government and the corporation is modeled in a game theoretic framework, which is then solved to find equilibrium decisions and to develop insights. It was concluded that offering both positive and negative disclosure subsidy benefits both parties than when the government does not intervene. Furthermore, given high positive and negative disclosure cost, the corporation would prefer that the government adopt a pure environmental policy, however, the latter would prefer the social welfare policy. Finally, under environmental policy, the corporation benefits more when the sensitivity to negative disclosure level to environmental factor is less, however, both parties benefit under the two other policies.

Does it matter what your reasons are when deciding to disclose (or not disclose) a disability at work? The association of workers\u2019 approach and avoidance goals with perceived positive and negative workplace outcomes

Deciding whether to disclose a disability to others at work is complex. Many chronic mental and physical health conditions are associated with episodic disability and include times of relative wellness punctuated by intermittent periods of activity limitations. This research draws on the disclosure processes model to examine approach and avoidance disclosure and non-disclosure goals and their association with perceived positive and negative workplace outcomes. Participants were 896 employed individuals (57.7% women) living with a chronic physical or mental health/cognitive condition. They were recruited from an existing national panel and completed an online, cross-sectional survey. Participants were asked about disclosure decisions, reasons for disclosure/non-disclosure, demographic, work context and perceived positive and negative disclosure decision outcomes (e.g., support, stress, lost opportunities). About half the sample (51.2%) had disclosed a disability to their supervisor. Decisions included both approach and avoidance goals. Approach goals (e.g., desire support, want to build trust, maintain the status quo at work) were significantly associated with perceived positive work outcomes regardless of whether a participant disclosed or did not disclose a disability at work, while avoidance goals (e.g., concerns about losing one’s job, feeling forced to disclose because others notice a problem) were associated with perceived negative work outcomes. The findings highlight benefits and challenges that workers perceive arise when they choose to disclose or not disclose personal health information. By better understanding disclosure decisions, we can inform organizational health privacy and support gaps to help sustain the employment of people living with disabilities.

Effect of Sexual Esteem and Sexual Communication on the Relationship Between Body Image and Sexual Function in Chinese Heterosexual Women

BackgroundSexual self-esteem and communication on sexual issues with a partner contribute greatly to an individual's quality of sex life; however, their effects on the relationship between body image and sexual function are underexplored. AimTo test a serial mediating pathway of sexual self-esteem and sexual communication underlying the relationship between body image and sexual function. MethodsA total of 510 women aged 18–53 years (mean = 28, SD = 5.5) who were involved in an intimate relationship completed an online survey. OutcomesWomen's (i) body appreciation, (ii) body image self-consciousness during sexual intimacy, (iii) sexual self-esteem, (iv) dyadic sexual communication, (v) negative disclosure apprehension, and (vi) sexual function were assessed. ResultsFindings revealed that sexual self-esteem and dyadic sexual communication played a serial mediating role in the relationship between body image (body appreciation and body image self-consciousness during sexual intimacy) and sexual function, and the relationship between body image and arousal, lubrication, orgasm, satisfaction, and pain. Sexual self-esteem and negative disclosure apprehension also played a serial mediating role in the relationship between body image and sexual pain. In addition, dyadic sexual communication played a unique mediating role in the relationship between body image and sexual function, which is isolated from the effect of sexual self-esteem. Clinical ImplicationsWomen's sexual self-esteem and sexual communication with their partner can make beneficial contributions to the relationship between body image and sexual function. Therefore, promoting women's positive body image, sexual self-esteem, and sexual communication skills deserves attention from women themselves and clinicians. Strengths & LimitationsThis study used a robust method of data analysis to test the mediating effect of sexual self-esteem and sexual communication to clarify the mechanism underlying the relationship between body image and sexual function among Chinese women; however, causal conclusions cannot be drawn. Furthermore, various demographics including participants' age, education level, sexual orientation—factors such as relationship status and length, relationship functioning, and partner-related variables—and other aspects of sexual self-concept and sexual communication should be examined in future research. ConclusionThe current study indicates that women's thoughts and feelings regarding sexuality and communicating sexual issues with their partner are associated closely with their body image and sexual function.T Wu, Y Zheng. Effect of Sexual Esteem and Sexual Communication on the Relationship Between Body Image and Sexual Function in Chinese Heterosexual Women. J Sex Med 2021;XX:XXX–XXX.

\u201cHow many times did I not want to live a life because of him\u201d: the complex connections between child sexual abuse, disclosure, and self-injurious thoughts and behaviors

BackgroundMeta-analyses have confirmed an association between child sexual abuse (CSA) and non-suicidal and suicidal self-injurious thoughts and behaviors (SITB), yet the mechanisms linking these factors are, to date, poorly understood. The goal of the current study is to explore one potential influencing factor acting in the association between CSA and SITB, which is the disclosure experience. Disclosure has been identified as a prominent factor in the healing process of survivors, with a lack of support following disclosures heightening negative outcomes. Exploring the impact of CSA disclosure on SITB is necessary to build effective prevention and intervention strategies.MethodsThis qualitative study is part of a larger initiative spanning diverse research sites in Canada and in Ireland and aiming to lend voice to young people who were sexually abused in childhood/adolescence. Participants were recruited from community-based sexual abuse/assault agencies, hospital-based specialized clinics and child advocacy centres. The Long Interview Method, based on a branch of phenomenology, was used to guide research design and data collection. The current thematic analysis, informed by a stress-diathesis model, is based on a sample comprised of 21 ethnically diverse youth aged 15 to 25 who self-reported a sexual abuse experience in their childhood or teenage years and who, as part of the interview on their disclosure processes, revealed past or current SITB.ResultsThe thematic analysis led to the identification of four main themes that both confirmed past research and conceptual models on SITB, and provided new insights. Participants perceived a clear link between their CSA experience and SITB and other mental health issues. They offered their views on the meanings of SITB for CSA victims: to cope with abuse; to end the abuse; to express self-hatred and loneliness; and to let people know about their suffering. They described how negative disclosure experiences led to more nonsuicidal and suicidal SITB. Yet, participants also revealed that receiving support for their SITB created opportunities for CSA disclosure and support.ConclusionsThis study showed complex connections between CSA experiences, disclosure and nonsuicidal and suicidal SITB. Understanding the reciprocal influences between SITB, CSA disclosure and help-seeking could better equip mental health professionals and caregivers to provide support and foster healing and recovery in CSA victims.

You Have Been Forewarned! The Effects of Risk Management Disclosures and Disclosure Tone on Investors’ Judgments

SEC risk disclosure standards require the standalone disclosure of risk factors and do not permit the concurrent disclosure of risk management information. This differs from requirements in regimes such as Germany. The SEC is considering mandating risk management disclosures. We experimentally examine how the disclosure of risk management information alongside risks and the risk disclosure tone used influence investors’ stock valuation judgments, with and without materialization of the disclosed risk. We find that without risk materialization, investors provide lower (higher) stock valuations when a positive versus negative disclosure tone is used in the absence (presence) of risk management disclosures. With risk materialization, a positive tone leads to lower stock valuations only in the presence of risk management disclosures. Our findings have implications for managers and regulators, as investors may penalize firms that make good faith risk disclosures, even if these risks have been properly managed.

PENGARUH PROFITABILITAS DAN LEVERAGE TERHADAP PENGUNGKAPAN LINGKUNGAN

This study aims to examine the effect of profitability and leverage on environmental disclosure of companies on the Indonesia Stock Exchange. This study uses secondary data in the form of annual reports during 2016-2018 accessed on www.idx.co.id. The population in this study is 641 companies and the samples are 48 companies selected using the Purposive sampling method. The data analysis method used is multiple linear regression with the help of the SPSS program. The results show that profitability affect environmental disclosure and leverage affect negative environmental disclosure.

Flood risk awareness and property values: evidences from Seoul, South Korea

ABSTRACT There is ongoing debate about flood risk discounts regarding property values. While some researchers claim that housing prices reflect flood risk, a growing body of literature has shown that flood risk is quickly forgotten after a flood event, and risk discounts are minimal in the long term. This study provides new evidence of flood risk discounts, with an emphasis on the role of flood risk awareness based on the case of Seoul, South Korea. This paper empirically examines how flood risk discounts vary depending on past flood experiences, and analyzes whether they are affected by the disclosure of inundation hazard maps. According to the results, flood risk discounts are disproportionally higher in districts with severe past flood experiences, but interestingly, there is no evidence that negative disclosure effects of hazard information on property values exist. These findings imply that home buyers carefully consider flood risk in their housing transactions in high flood risk areas, even before hazard maps become available, possibly because having flood insurance is rare in South Korea. Understanding the relationship between flood risk awareness and risk discounts in terms of property values has vital implications for disaster management policies as they relate to cities’ resilience. HIGHLIGHTS The flood risk discount in property values could be affected by the risk awareness. The risk discount is disproportionally high in areas with severe flooding experience. Negative disclosure effects of hazard map on property values do not exist in Seoul. Hazard disclosure could be actively used considering the level of the risk awareness.

A Good Time to Bury Bad News: A Strategic Perspective on Firms’ Timing of Product Recalls

Firms have incentives to make a positive impression on externals, such as investors or customers. Prior research assumed that firms pursue impression management isolated from competing firms. However, firms may not necessarily strive after making the best possible impression. What matters instead is the relative comparison with their competitors. In this paper, we argue that firms manage impression relative to their competitors and they time their negative disclosures, such as product recalls, depending on competitors’ disclosures. Using data on product defects and recalls in the US automotive industry, we find evidence that firms seize competitors’ negative disclosures as an opportunity to bury their own negative news.

Price pressure effects of short selling on environmental disclosure

ABSTRACT Most studies argue that short selling is an external constraint mechanism that can restrict managers’ manipulation of financial information according to the disciplining hypothesis. Whether this conclusion is also suitable for environmental information, however, is still unclear. Therefore, we examine the effect of short selling on environmental disclosure by using empirical data from China. We find that pilot firms, after being added to the pilot short-selling list, disclose less environmental information than non-pilot firms do. Further examination shows that the pilot firms’ internal and external monitoring mechanisms can affect managers’ decision-making regarding environmental information. The results suggest that when a short-selling mechanism is implemented, it is important that the appropriate regulatory department mandatorily receives environmental information disclosure. Simultaneously, the pilot firms’ internal and external monitoring mechanisms should be strengthened to mitigate the negative disclosure behavior of managers.

Negative disclosures in corporate social responsibility reporting

PurposeThis study aims to reveal the quantity, quality and cultural differences of negative corporate social performance (CSP) disclosures in large firms' corporate social responsibility (CSR) reports. Firms are expected to be transparent about the impacts and outcomes of their CSP. A central aspect of transparency is balance, which means disclosing both positive and negative CSP.Design/methodology/approachContent analysis was applied to 75 CSR reports of large firms chosen from the Forbes Top 500 list. The firms belong to three cultural clusters: Anglo, Confucian Asia and Germanic/Nordic Europe.FindingsFirms made few negative CSP disclosures, yet the quantity of negative CSP disclosures varied among cultural clusters. Reports from Germanic/Nordic Europe showed the highest number of negative CSP disclosures, reports from Confucian Asia showed the lowest number and the Anglo cluster's number fell in between. The Asian firms communicated corrective actions more often than firms from the other clusters.Research limitations/implicationsThis study focused on negative CSP disclosures in the CSR reports – not omitting negative CSP. The practice of self-laudatory CSR communication decreases the likelihood that relevant stakeholders will believe what firms report about.Originality/valueStudies on the quality and quantity of negative disclosures are rare; by examining cultural differences, this study contributes to the limited body of knowledge.

Disclosures of CEO inside Debt Changes and the Timing of New Bond Issuance

I explore the timing strategies for bond issuances based on disclosures of CEO inside debt by using hand-collected data of 5,775 U.S. public companies from 2006 to 2017. During the months before proxy statement releases, new changes in CEO inside debt are private information to companies' insiders. Companies can exploit this information asymmetry to issue bonds when the market, based on publicly available information of inside debt, perceives these companies' debt agency problems as relatively insignificant. I find that companies cluster their bond offerings in the immediate quarters after (before) disclosures of positive (negative) inside debt changes. The tendencies to time bond issuances based on inside debt disclosures also increase with the magnitudes of the disclosed changes. In addition, the adoption of these timing strategies is more observable when the issuing firms are regular issuers or when the new issues do not include covenants, especially the debt-restriction covenants. Finally, I verify that these timing strategies help reduce the cost of borrowing, as the bonds issued at favorable times, i.e. right after positive disclosures or before negative disclosures, have lower offering yield spreads than those issued at non-favorable times.

Torpedo Your Competition: Strategic Reporting and Peer Firm IPO

A firm’s initial public offering (IPO) generates negative externalities for industry competitors. To mitigate this threat, incumbent firms manage their earnings downwards, issue more negative management forecasts, and use a more negative disclosure tone when industry peers file for an IPO. Negative accruals reverse when the threat subsides. Incumbents manage earnings more aggressively when costs are small and benefits are large. Such strategic disclosure lowers incumbent firm valuation multiples and associates with more negative IPO firm media sentiment. IPO firms obtain lower offer prices, raise less capital, and are more likely to withdraw from the offering. They also invest less, hoard more cash, and experience lower profitability post IPO, while incumbents experience higher profitability and market share growth. Our results highlight the role of strategic reporting on product market competition and identify a new cost of going public.

Sustainable grocery retailing: Myth or reality?—A content analysis

AbstractSustainability reports are a crucial instrument to inform outside stakeholders not only about a company's sustainability performance but also to manage impressions. However, they are often prone to greenwashing and the reporting of negative topics can jeopardize corporate legitimacy. Therefore, this paper aims to analyze reporting quality and how grocery retailing companies deal with this challenge of reporting the true picture. The empirical material is taken from the latest sustainability reports and information available on the Internet for two major German supermarkets, six grocery discount retailers, and two organic supermarkets. The Global Reporting Initiative standards are used to assess and compare the extent of information disclosure. A qualitative content analysis is applied to identify negative disclosure aspects and their legitimation. While the main focus areas (supply chain, employees, environment/climate, and society) are similar for the companies, different levels of reporting quality appeared. Negative information is rarely reported and “abstraction” and “indicating facts” are the dominant legitimation strategies.

Believe #metoo: sexual violence and interpersonal disclosure experiences among women attending a sexual assault service in Australia: a mixed-methods study

ObjectivesSexual abuse is a strong predictor of future psychiatric problems. A more nuanced qualitative understanding of mental health outcomes, in the context of interpersonal responses from family members towards survivors...

Duty of Disclosure: Comparison of Securities Regulations between U.S. and S. Korea by Cases in Bio-Pharmaceutical Industry

This paper introduces the concept of false and misleading statements or omissions regarding companies in the bio-pharmaceutical industry, based on court decisions. Due to essential problem of stock market, “asymmetry of information,” if company’s public statements about material information are not trustworthy, investors who purchased the company’s shares might lose their assets, and the confidence in and the soundness of the stock market would be damaged as a result. This paper attempts to clarify violations of §10(b) of the Securities Exchange Act of 1934 and the corresponding rule of the Securities and Exchange Commission, 17 C.F.R. §240.10b-5 (“Rule 10b-5), particularly, (1) a material misrepresentation or omission, and (2) scienter through reviewing recent cases of bio-pharmaceutical companies, Aratana case and Chelsea case. In the Republic of Korea, Hanmi Pharm’s caserepresents how the late public announcement or omission would affect investors’ half-baked decision and damage the stock market by insider trading. Pursuant to §391 of the Financial Investment Services and Capital Market Act, Korea Exchange announced a law “Negative Disclosure Regulations on Material Information,” on May 2, 2016. Nevertheless, the regulation does not appear to be effective guideline for investors and stock market. In the proposed scienter tests, this paper introduces ImClone stock trading scandal to represent the relatively easy scienter case in the bio-pharmaceutical industry. Also, this paper illustrates two hypothetical cases, Brandon Therapeutics, Inc. in the United States, and Hoon Biosimilar Co., Ltd. case to suggest the better solution to solve scienter cases in the bio-pharmaceutical industry. In conclusion, this paper compares both American and Korean cases and related regulation, and then proposes a supplement that will promote a sound stock market.

Depression symptoms and negative online disclosure among young adults in college: a mixed-methods approach

Background: Social media may be novel and promising avenues to identify youth at risk for depression. Missing from prior research on youth social media use in the service of mental health is our understanding of the kinds of negative experiences young people disclose online and their associations with depression symptoms.Aims: Using a mixed-methods approach, this study: (1) examined the association between depression symptoms and online disclosure of negative emotions; (2) explored the kinds of negative experiences young adults, in their own words, disclosed online; and (3) investigated the associations between depression symptoms and the online disclosure of negative experiences.Methods: Young adults in college (N = 261; 66 males, 195 females Mage 22) completed quantitative as well as qualitative questionnaires about their Facebook content and use and about their mental health (e.g. depression symptoms). Responses were analyzed using a thematic analysis, and a series of binary logistic regression analyses, controlling for age, gender, Facebook use and self-esteem.Results: An inductive thematic analysis of 121 qualitative responses reflecting negative emotional states revealed fours themes of negative experiences: life hassles, relationships, academics and work. Binary logistic regression analyses revealed that youth who reported higher depression symptoms were two times more likely to disclose negative emotions online and were three times more likely to disclose various hassles online than their peers who reported lower symptoms. Active Facebook users were almost two times more likely than less active users to disclose negative academic experiences.Conclusions: Online disclosure of negative emotions and experiences are linked with depression symptoms. Further, online disclosure of negative experiences may also reflect normative, age-related instabilities. In sum, social media may be promising avenues to detect mental health concerns (e.g., depression) in early adulthood.

The effects of executive compensation and outside monitoring on firms’ pre-repurchase disclosure behavior and post-repurchase performance

We show that corporate governance mechanisms play an important role in controlling managers’ opportunistic behavior. Low executive equity compensation and a high intensity of outside monitoring help to discourage undesirable self-interested disclosure decisions by management before share repurchases. Corporate governance mechanisms also have a significant impact on long-run abnormal stock prices and operating performance. Firms that manipulate pre-repurchase disclosures experience positive long-term abnormal stock returns. However, we do not find that these firms experience positive long-run operating performance. Corporate governance mechanisms significantly attenuate the tendency toward negative pre-repurchase disclosures and their effects on stock prices and operating performance.