TY - JOUR
T1 - The effect of economic policy uncertainty on investor information asymmetry and management disclosures
AU - Nagar, Venky
AU - Schoenfeld, Jordan
AU - Wellman, Laura
N1 - Funding Information:
We appreciate the helpful suggestions from John Core (the editor), Daniel Taylor (the referee), Nick Bloom, Steve Davis, Beverly Walther, and workshop participants at Baruch College, BYU, Georgetown University, INSEAD, Northwestern University, Pennsylvania State University, Temple University, the University of Hong Kong, the University of Michigan, the University of Utah, and the University of Texas at Austin. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.
Publisher Copyright:
© 2018 Elsevier B.V.
PY - 2019/2
Y1 - 2019/2
N2 - Investor uncertainty about firm value drives investors’ information collection and trading activities, as well as managers’ disclosure choices. This study examines an important source of uncertainty that likely cannot be influenced by most managers and investors: uncertainty about government economic policy. We find that this uncertainty is associated with increased bid-ask spreads and decreased stock price reactions to earnings surprises. Managers respond to this uncertainty by increasing their voluntary disclosures, but these disclosures only partly mitigate the bid-ask spread increase. We conclude that government economic policy uncertainty is an important component of firms’ information environments and managers’ voluntary disclosure decisions.
AB - Investor uncertainty about firm value drives investors’ information collection and trading activities, as well as managers’ disclosure choices. This study examines an important source of uncertainty that likely cannot be influenced by most managers and investors: uncertainty about government economic policy. We find that this uncertainty is associated with increased bid-ask spreads and decreased stock price reactions to earnings surprises. Managers respond to this uncertainty by increasing their voluntary disclosures, but these disclosures only partly mitigate the bid-ask spread increase. We conclude that government economic policy uncertainty is an important component of firms’ information environments and managers’ voluntary disclosure decisions.
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U2 - 10.1016/j.jacceco.2018.08.011
DO - 10.1016/j.jacceco.2018.08.011
M3 - Article
AN - SCOPUS:85052733263
SN - 0165-4101
VL - 67
SP - 36
EP - 57
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 1
ER -