Review of Financial Studies · 2019 · 137 citations · 32 references
BusinessAccountancyFinanceCorporate DisclosureCorporate FinanceCorporate ReportingCapital MarketsDisclosure TheoryFinancial ForecastingFinancial Reporting TheoryInvestor Relations ManagementInvestor SentimentFeedbackFeedback DisclosureForecasting Capital ExpendituresManagement Earnings ForecastsManagement ForecastsMarket Reaction To DisclosureMarket Reactions To Accounting InformationMarket Reactions To Disclosure
Abstract We explore the use of voluntary disclosure by managers to solicit market feedback. Using managerial capital expenditure forecasts, we find that managers adjust annual capital expenditures upward (downward) in response to positive (negative) stock market reactions to capital expenditure forecasts, but only for those forecast announcements that stimulate rather than discourage informed trading. These capex adjustments motivated by market feedback correlate with higher future performance and are stronger (weaker) when outsiders (managers) are more informed. Finally, we show that managers are more likely to issue and learn from capex forecasts when predisclosure stock prices are affected by transitory nonfundamental shocks.
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Market Liquidity and Performance Monitoring
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Price Informativeness and Investment Sensitivity to Stock Price
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