Strategic Information Disclosure Research Articles

Analyst coverage and innovation information manipulation: evidence from listed companies in China

ABSTRACT This study examines the impact of analyst coverage on the strategic innovation information disclosure behaviour of Chinese A-share listed companies from 2011 to 2022. The findings suggest that firms with higher analysts coverage are more likely to manipulate their innovation information, especially positive innovation information manipulation (IIM), during the annual report disclosure process. Heterogeneity analysis suggests that the promotion effect is stronger in firms with high analyst ratings.

Customer identity concealing and insider selling profitability: Evidence from China

This study investigates whether insiders exploit the information advantage arising from customer identity concealment to profit from selling their shares. We examine this issue in the context of China, given the voluntary nature of customer information disclosure there. We find that insider selling profitability is significantly greater when firms conceal customer identities than when they disclose them, especially when customer identities are more informative. We also find evidence of significant trading profitability for both insiders and their relatives, as well as both core and general executives. Furthermore, we find that the results are weaker for firms with more effective internal monitoring and those with more attention from sophisticated market participants but are stronger for firms with more information disclosure manipulation. These findings are consistent with the hypothesis that insiders opportunistically trade on customer-related private information rather than unintentionally sell shares. In additional tests, we find that insiders deliberately conceal customer identities in response to their personal trading incentives, indicating that insiders may increase their information advantage through strategic customer information disclosure. Overall, our research sheds light on the black box of information sources of insider trading from the perspective of supply chains and the insider trading incentives behind firms' concealment of customer identities.

Quality Selection in Two-Sided Markets: A Constrained Price Discrimination Approach

Optimizing Revenue in Two-Sided Online Markets through Strategic Quality Selection and Information Disclosure Ensuring profitable operations in two-sided online marketplaces demands an astute analysis of seller quality and strategic information sharing with buyers. A recent paper, titled “Quality Selection in Two-Sided Markets: A Constrained Price Discrimination Approach” by B. Light, R. Johari, and G. Weintraub delves into the nuances of this operation. The authors explore the challenge that platforms encounter in deciding which sellers to allow and how much quality information to share with buyers in order to enhance platform revenue. Utilizing two distinct two-sided market models, the paper unveils conditions under which adopting straightforward information structures, such as excluding certain sellers or not differentiating among participating sellers, proves to be a revenue-maximizing strategy. This study utilizes a constrained price discrimination problem to reveal specific strategies platforms can use to adjust information structures in diverse market scenarios, providing insights for digital platforms aiming to navigate the marketplace more effectively.

Strategic Pricing and Information Disclosure in Crowdfunding

Strategic Pricing and Information Disclosure in Crowdfunding

Confession and greenwashing: the impact of water information disclosure on firm value

Water pollution has become a serious problem in recent years, and firms are one of the main culprits for this environmental issue. Encouraging companies to improve water management behavior is necessary to protect water resources. Based on panel data of Chinese A-share listed companies in water-sensitive industries, this study used text analysis techniques to study the impact of corporate water information disclosure on pollutant emissions, strategy on firm value, and the U-shaped moderating role of local governments’ environmental regulation. The results show that (1) an increase in the amount of emission information texts to confess the water status can help enhance firm value. (2) The increase in the amount of strategic information texts, both the tone of emission, and strategic information texts have negative impacts on firm value, which help enterprises greenwash. Further analyses find a U-shaped moderating effect of governments’ environmental regulation on the relationships between emission information disclosure, strategic information disclosure and firm value, and varies under the different ISO14001 certification situations and life cycles. This research explains the effectiveness of corporate water information disclosure and the influence of governments’ environmental regulation, which plays a vital role in promoting firms to improve their environmental behaviors, reduce water pollution, and further achieve green development.

Dynamic Development Contests

How to Optimally Design Contests in Development Settings for Rapid and Efficient Results: Firms increasingly leverage their expert suppliers to develop innovative products and services while minimizing both time-to-market and expenses. In “Dynamic Development Contests,” Sina Khorasani, Ersin Korpeoglu, and Vish Krishnan study how companies can effectively organize contests to stimulate development efforts from competing suppliers to minimize project lead times while keeping the cost of incentives in check. Their characterization of the optimal designs reveals that flexible rewards are most effective when funds are sufficient. However, in cases where resources are constrained, strategic information disclosure in the form of probabilistic disclosure of any change in the state of competition serves as a valuable incentive instrument that helps contest organizers achieve their lead-time minimization objectives.

Level of voluntary disclosure and market value: An applied study on companies listed in Amman Stock Exchange

Voluntary disclosure is viewed as an essential communication tool through which the company's ideas can be promoted to potential stakeholders, which contributes to achieving the company's growth and sustainability. This study came to reveal the reality of voluntary disclosure in the Jordanian industrial companies and its impact on its market value. The descriptive-analytical approach was adopted, where content analysis of the financial reports published by 72 industrial companies listed on the Amman Stock Exchange during the period (2016-2022). The study found that the level of disclosure of non-financial items included the aspects of the board of directors, social responsibility, and community policy were high, which reached 56%, compared to the level of disclosure of financial items, which reached 43%. This indicates that companies pay more attention to disclosing non-financial items than financial items. In addition, the study indicated that companies with a high level of voluntary disclosure have a better market value compared to those companies that have not disclosed or have a lower level of disclosure. Moreover, increasing voluntary disclosure of strategic information, financial information, and non-financial information increases the market-to-book value, because voluntary disclosure enhances the information available to investors about shares, which in turn improves the market value.

Strategic information disclosure in vertical markets

We investigate the Italian fuel market after an asymmetric transparency rule the came into force allowing gas stations to conceal some price cuts on the governmental price comparison platform, hardly visited by customers but used by oil companies to monitor the market. As oil companies usually set retail prices, and gas stations are in charge of communication, the disclosure of price cuts induces rival wholesalers to behave less aggressively. Consequently, the prices of those gas stations which conceal information and those of their neighboring competitors are, on average, higher. Empirical findings support the conclusions of the strategic information disclosure argument, and they leave some room for complementary explanations, such as differences in costs or in profitability.

Strategic information disclosure and the cost of equity capital: Evidence from China

Based on SWOT theory with respect to firm's strength, weakness, opportunity, and threat, we construct a corporate strategic dictionary to quantify strategic information disclosure (SID). We then explore the association between SID and the cost of equity capital. Our evidence in China shows that SID is negatively associated with the cost of equity capital. Further, analysts’ forecasts and stock liquidity have a mediating effect on strategic disclosure toward the cost of equity capital, respectively. Our findings support the channel of reducing information asymmetry for the impact of SID on the cost of equity capital.

Talk less and do more: Expected strategic adjustments vs. actual changes in the Chinese firms

Using a sample of listed firms from 2011 to 2019 in Chinese A-share markets, this paper examine the consistency of strategic information disclosure and strategic behavior change, and it's impact on firm's future growth and the cost of capital. Using the expected strategic adjustment as a proxy of strategic information disclosure, we find that expected strategic adjustment is positively associated with actual strategic changes, and such positive association is strengthened for the firms with state-owned nature, more redundant resources, defensive strategy, lower economic policy uncertainty and higher value. Furthermore, we find that the consistency of talks and actions is associated with a higher firm growth. If talk more and do less, firms will face a higher cost of capital. In brief, this paper provides an indicator of strategic information disclosure to predict corporate strategic behavior for Chinese listed firms. More importantly, we suggest that the management of firm's talk-do relation is meaningful to firm growth, and the market will negatively respond to the deviation of “talk more but do less”.

Algorithmic Lending, Competition, and Strategic Information Disclosure

Algorithmic Lending, Competition, and Strategic Information Disclosure

Dynamic Development Contests

Public, private, and not-for-profit organizations find advanced technology and product development projects challenging to manage due to the time and budget pressures, and turn to their development partners and suppliers to address their development needs. We study how dynamic development contests with enriched rank-based incentives and carefully-tailored information design can help these organizations outsource their development projects at the minimum project lead time by stimulating competition among suppliers. We show that an organization can use dynamically adjusted flexible rewards to achieve the absolute minimum expected project lead time at a significantly lower cost than a fixed-reward policy. Importantly, our flexible-reward policy pays the absolute minimum expected reward (i.e., achieves the first best). We further study the case where the organization does not have sufficient budget to offer a reward that attains the absolute minimum expected lead time. We propose that in this case, the organization can dynamically increase the contest reward until its budget constraint binds and then use information sharing as a strategic tool to incentivize suppliers. Specifically, we propose an easy-to-implement random-update policy where the organization periodically monitors the status of suppliers at random times and immediately discloses any partial progress. We show that such a random-update policy outperforms other canonical information disclosure strategies. Our results indicate that dynamic rewards and strategic information disclosure are powerful tools to help organizations outsource their development needs swiftly and cost effectively.

Technology adoption for airport security: Modeling public disclosure and secrecy in an attacker-defender game

Airport security agencies throughout the world play a vital role in safeguarding the aviation industry against terrorist attacks. As a result of the evolving and adaptive behaviors of terrorists, it is critical that security agencies continue to adopt new airport screening technologies in order to expose and deter threats. To this end, the question arises as to whether or not to publicly disclose new screening technology adoption. Although there is literature on strategic information disclosure in defensive resource allocation, to the best of our knowledge, no previous literature has focused on modeling disclosure and secrecy for defensive technology adoption. To address this gap, we develop an attacker-defender game model where the defender is considering adopting a new screening technology, and an adversary is considering attacking an aviation target. Our model addresses two distinct information disclosure strategies on behalf of the defender: (i) public disclosure, which is modeled in a sequential subgame, and (ii) secrecy, which is modeled in a simultaneous subgame. We find that in the proposed complete information game, disclosure of the defender’s technology adoption strategy is either preferred to, or equivalent to, maintaining secrecy. That is to say that the defender never prefers secrecy over disclosure. Overall, this paper helps to fill a significant gap in the literature concerning technology adoption and information disclosure strategies for airport security screening, and also has implications that can inform decision makers in the broader homeland security domain. Historical data is used to drive numerical sensitivity analyses of the equilibrium strategies.

Explain or conceal? Causal language intensity in annual report and stock price crash risk

Based on textual analysis technology, this paper investigates the relationship between causal language characteristics in annual financial reports and stock price crash risk. We find that the causal language intensity is positively associated with future stock price crash risk, which reveals that managers manipulate the causal language to successfully hide adverse information, then leading to higher stock price crash risk. Our results also hold after addressing the potential endogenous problems and robustness problems. Moreover, based on the mediation effect of information asymmetry, we demonstrate that the use of causal language can make information more complex to hide and mix adverse information, thus increasing information asymmetry. In addition, the positive effect of causal language intensity is stronger in the disclosure of bad news than good news. Overall, strategic information disclosure behavior that we reveal, has clear policy implications for regulators to strengthen the supervision firms’ information disclosures.

Media, independent non-executive directors and strategy disclosure by non-financial listed firms in the UAE

PurposeThis study aims to investigate the effect of media coverage, negative media tone and the interaction between negative media tone and independent non-executive directors (INEDs) on strategic information disclosure (SD).Design/methodology/approachThe authors rely on media agenda-setting theory, agency theory and a panel data set of 52 UAE non-financial listed firms from 2009 to 2016. Multivariate regressions examine the effect of media coverage and negative media tone on SD and examine the moderation of INEDs on the effect of negative media tone on SD while controlling for firm size, board size, board meeting frequency, firm profitability and leverage.FindingsThe results show that negative media tone has a negative effect on SD, and there is no association between media coverage and SD. The results show that INEDs are negatively associated with SD and have a negative moderating effect on the negative media tone–SD relationship. INEDs follow a conservative approach, encouraging less SD when their firms face negative media tone.Research limitations/implicationsThe authors measured media coverage and negative media tone by the number of news articles. In the robustness test, they use media tone score. They measured SD using an index that captures firm strategy dimensions. Though these measures are inherently subjective, they were used to measure variation in media coverage, media tone and SD across listed UAE non-financial firms. Mitigation of subjectivity was achieved through rigorous cross-checking measurements.Practical implicationsFindings assist UAE policymakers and the international business community with insights related to articulation of media to SD and INEDs’ role in moderating the effect of media on SD.Originality/valueTo the authors’ knowledge, this is the first study that combines media agenda-setting theory with agency theory and SD in an emerging market economy (the UAE). The study is also among the few studies that illustrate the possible role of INEDs under different media tones in emerging markets.

Corporate and Strategic Information Disclosure and Earnings Management: Evidence from Listed Firms at the Uganda Securities Exchange

The purpose of this study is to examine the effect of corporate and strategic information disclosure on earnings management among listed firms at the Uganda Securities Exchange. We conduct our survey on a census of 9 non-financial listed firms spanning a period of 6 years (2012-2017). The study uses the magnitude of discretionary accruals obtained from the De Chow, Sloan and Sweeney (1995) model as a proxy for earnings management. The study’s results show a negative and significant effect of corporate and strategic information disclosure on earnings management. The implication of this finding is that information disclosure related to corporate and strategic information constitutes a constraint to the proliferation of earnings management. The study could benefit regulatory bodies that are considering making disclosure regimes effective. For instance, we find that the disclosure of corporate and strategic information drives EM downwards. In addition, the results of this study might assist regulators and policy makers in understanding better the interconnections between corporate and strategic information disclosure and earnings management practices in Uganda. This study, however, has some limitations. First, because the study uses a self-constructed disclosure index, certain information items employed in prior studies might be omitted. Second, whereas hand collecting the necessary data on corporate and strategic information from the narrative section of the annual reports allows for a data set containing rich information, the exercise is costly and time-consuming.

EFEK MEDIASI INTERNET REPORTING OF STRATEGIC INFORMATION ATAS PENGARUH KOMISARIS INDEPENDEN DAN KOMITE AUDIT TERHADAP KINERJA KEUANGAN

In corporate governance, the role of independent commissioners and audit committees is very important in ensuring that all operational and strategic activities are going well because they greatly affect the financial performance of the entity. This study aims to empirically analyze the influence of independent commissioners and audit committees on financial performance and whether the existence of strategic information disclosure through the internet (IRSI) is able to mediate independent commissioners and audit committees on financial performance to be better or vice versa in banking companies. The population in this study are companies listed on the Indonesia Stock Exchange in 2014-2016. The data obtained is secondary data. Data analysis using WarpPLS 3.0 program with statistical models, which is Structural Equation Modeling Analysis (SEM). The results of the study indicate that independent commissioner variable has no significant effect on financial performance, but on the contrary the audit committee variable has a significant impact on financial performance. In addition, independent commissioner variable has no significant effect on the internet reporting of strategic information (IRSI), but audit committee variable has a significant effect on IRSI. The IRSI variable has a significant influence on financial performance. The conclusions of mediation show that IRSI was able to mediate the audit committee on financial performance but IRSI was unable to mediate independent commissioner variables on financial performance.

Strategic information disclosure, integrated reporting and the role of intellectual capital

PurposeThe purpose of this paper is to use a theoretical and empirical model to investigate the adoption of the integrated reporting (IR) framework as a strategic choice to signal intellectual capital (IC) to equity investors, with specific reference to the pharmaceutical industry.Design/methodology/approachThe choice of drafting an integrated report is modelled as a means for managers to strategically disclose price-relevant information related to IC. The voluntary disclosure model developed by Verrecchia (1983) is used, also introducing the role of financial analysts to derive a directly reproducible empirical equation.FindingsTheoretically, as IR requires managers to exert an effort in reporting activity, this work shows that in equilibrium, only firms with sufficient IC have decided to adopt IR, resulting in rational investors’ willingness to pay more only for the forecasted earnings of integrated reporters. This theory is tested in the pharmaceutical sector, where the modelling choice is probably more valid, with mixed results.Research limitations/implicationsWhen compliant with the International Integrated Reporting Council’s (IIRC) standards, IR provides the means to disclose IC in a perfectly verifiable way. Furthermore, since the IIRC has only recently been established, the conclusions have only been tested on a limited data set.Originality/valueThis work connects the value relevance of IR to IC by adopting an equilibrium approach, which, in turn, provides specific indications of how to build a consistent empirical test of the theory.

To Share or Not to Share: Unintended Consequences in Strategic Disclosure of Information at Work

Information disclosure in the workplace has a tremendous impact on organizational functioning and relationships among employees. Prevailing findings suggest that information disclosure, especially through self-disclosure, can provide important organizational and interpersonal benefits. However, revealing potentially negative information about oneself may bring about adverse consequences to individuals. The papers of this symposium identify novel factors affecting the costs and benefits of strategic information disclosure, including the context of sharing, the target of information and the nature of existing relationships in the workplace. Beyond their theoretical contributions, findings point to important practical implications for detecting truthful opinions, affecting negotiation outcomes, and promoting employee well-being. Stefan Thau, one of the most prominent scholars on the topic of social judgment and norm violation, will facilitate a group discussion about the papers and future directions in this field. When and Why Randomized Response Techniques (Fail to) Elicit the Truth Presenter: Leslie John; Harvard Business School Presenter: George Loewenstein; Carnegie Mellon U. - Dietrich College of Humanities and Social Sciences Presenter: Alessandro Acquisti; Heinz College - Carnegie Mellon U. Presenter: Joachim Vosgerau; Bocconi U. Getting to No: Deception Using Strategic Negotiation Presenter: Krishnan Anand; U. of Utah Presenter: Pnina Feldman; Haas School of Business, UC Berkeley Presenter: Polly Kang; The Wharton School, U. of Pennsylvania Presenter: Maurice Schweitzer; U. of Pennsylvania Exaggerating the Reputational Costs of Revealing Secrets Presenter: Michael Kardas; U. of Chicago Booth School of business Presenter: Amit Kumar; U. of Chicago Booth School of business Presenter: Nicholas Epley; U. Of Chicago Disclosure of Low Socioeconomic Status of Origin in a “High Place” Presenter: Tianyu He; INSEAD Presenter: Andy Jiexiong Yap; INSEAD Whats in a Name? The Psychology Namedropping in Organizational Life Presenter: Ovul Sezer; Kenan-Flagler Business School, U. of North Carolina at Chapel Hill

Why Do Large Investors Disclose Their Information?

Large investors often advertise private information at private talks or in the media. To analyse the incentives for information disclosure, I develop a two-period Kyle (1985) type model in which an informed short-horizon investor strategically discloses private information to enhance price efficiency. I show that information disclosure is optimal when the scope of private information is large and when the large investor has a high reputation. Short investment horizons induce information disclosure among investors and are beneficial for price efficiency. However, strategic information disclosure reduces trading before disclosure and harms price discovery.