Publication Type

Journal Article

Version

acceptedVersion

Publication Date

1-2015

Abstract

Using a natural experiment (Regulation SHO), we show that short selling pressure and consequent stock price behavior have a causal effect on managers' voluntary disclosure choices. Specifically, we find that managers respond to a positive exogenous shock to short selling pressure and price sensitivity to bad news by reducing the precision of bad news forecasts. This finding on management forecasts appears to be generalizable to other corporate disclosures. In particular, we find that, in response to increased short selling pressure, managers also reduce the readability (or increase the fuzziness) of bad news annual reports. Overall, our results suggest that maintaining the current level of stock prices is an important consideration in managers' strategic disclosure decisions.

Keywords

Regulation SHO, short selling, corporate disclosure, forecast precision, annual report readability, managerial incentives

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

Journal of Accounting Research

Volume

53

Issue

1

First Page

79

Last Page

117

ISSN

0021-8456

Identifier

10.1111/1475-679X.12068

Publisher

Wiley

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1111/1475-679X.12068

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