Selective Private Disclosure: Is Silence Golden?
Job Market Paper
Abstract: I present evidence that market participants use Reg FD filings to learn about and price protect against firms’ material selective private disclosure (“SPD”) activity. Using an expectation of SPD activity based on observable firm events associated with informed trading, I document that market participants price protect whenever Reg FD filings deviate (positively or negatively) from that expectation. Intuitively, market participants price protect more when Reg FD filings exceed their expectations, consistent with greater-than-expected Reg FD filings being interpreted as an indication of higher SPD activity. However, market participants also price protect more when Reg FD filings fall short of their expectations, suggesting that market participants do not interpret lower-than-expected Reg FD filings as a signal of lower SPD activity, but rather as an indication that the firm has not transparently disclosed that activity. Collectively, my analyses suggest that, although Reg FD filings inform market participants’ price protection, they do not allow firms to credibly signal they do not engage in SPD activity.
Available on SSRN
Consumer Responses to the Revelation of Corporate Social Irresponsibility with Hans Christensen, Emmanuel De George, and Daniele Macciocchi
Revising for resubmission at Journal of Accounting Research
Abstract: Using micro-level data of US weekly brand-level sales, we examine end-consumer responses to public revelations of corporate social irresponsibility (CSI). Despite survey evidence that suggests end consumers care about CSI, we find that the vast majority of CSI revelations are not followed by changes in sales. It is only when we narrow our focus to a small number of highly visible CSI events that we find a 5.8% reduction in weekly brand-level sales over the four-week period following the event. This suggests that visibility plays a critical role in reducing end consumers’ awareness and integration costs with respect to CSI. While the direct consumer response is limited, it is likely that CSI events carry broader economic consequences beyond direct consumer responses. Consistent with this notion, we find that analysts reduce their long-term forecasts following the revelation of visible CSI events and discuss these issues in earnings conference calls. Overall, our findings highlight the importance of visibility in shaping consumer behavior towards CSI and suggest that the costs of highly-visible CSI events extend beyond immediate changes in end-consumer purchasing behavior.
Available on SSRN
Capturing Firm Economic Events with Khrystyna Bochkay, Roman Chyhcyla, and Jake Krupa
Revising for resubmission at Management Science
Abstract: A prevalent challenge in the disclosure literature is disentangling firms' disclosure choices from the changes in firm economics and governance that drive them. To better capture events that change firms' underlying economics, we propose a parsimonious and dynamic measure based on the frequency of event-driven 8-K items. We validate our measure by showing its association with changes in future firm performance and market participants’ uncertainty about that performance. We then demonstrate our measure’s application in two disclosure settings, where our measure (1) improves the model of the relation between performance and disclosure by accounting for forthcoming performance changes that have not been fully reflected in historically focused accounting metrics, and (2) helps alleviate the concern that changes in a firm’s underlying economics confound the relation between disclosure and associated capital market outcomes. Overall, our measure of firm economic events improves researchers’ ability to capture a firm’s underlying economics, resulting in a stronger empirical identification of disclosure choices.
Available on SSRN
Retool or Refresh: Board Changes Around CEO Departures with Fabrizio Ferri and Dhananjay Nanda
Abstract: This study investigates the evolution of board composition following a CEO turnover. Prior governance literature investigates the impacts of board composition on firm outcomes, but the slow rate of director replacement has resulted in limited evidence about how these bodies change. Using CEO turnover as an event which rapidly accelerates director turnover, we identify two distinct processes boards undergo when making en masse appointment and retention decisions: retooling and refreshing. Our results indicate that firms experiencing a strategic shift are more likely to change the human capital, social capital, and demographics of their board (retool). Conversely, those seeking strategic continuity opt to refresh, replacing departing directors with similarly qualified individuals. These findings demonstrate that firms engage in strategic shifts not only through CEO replacement, but also via board recomposition.
Does Taxation Lead to Representation? Real Effects of Digital Service Taxes on Individual Data Ownersip
Proprietary Costs of Insider Trading: Effects on Executive Compensation and Risk-Taking
Insurance Market Effects of Heterogeneous Beliefs About Climate Risk