Disclosure Frequency Induced Myopia and the Decision to be Public

53 Pages Posted: 6 Feb 2017 Last revised: 14 Sep 2017

See all articles by Kevin K. Li

Kevin K. Li

Santa Clara University

Vicki Wei Tang

Georgetown University - Robert Emmett McDonough School of Business

Date Written: September 2017

Abstract

This study examines whether disclosure frequency induced myopia influences the types of firms that go public and their choice of listing exchanges if they decide to do so. We find that the incentive to stay private in order to avoid disclosure frequency induced myopia creates a downward kink in the relation between the length of the cash conversion cycle and the proportion of public firms at the industry level around the time frame that corresponds to the mandatory reporting interval. Second, at the firm level, public firms with longer cash conversion cycles relative to industry peers are more likely to list on exchanges that require less frequent mandatory disclosure to minimize disclosure frequency induced myopia. Furthermore, when the mandatory reporting frequency increased from semi-annual to quarterly, we observe a sharper decline in the percentage of public firms from industries whose cash conversion cycles are between one quarter and two quarters relative to those from other industries both in the United States and in the United Kingdom.

Keywords: managerial myopia, mandatory disclosure frequency, investor impatience

JEL Classification: M41, G32, G34

Suggested Citation

Li, Kevin K. and Tang, Vicki Wei, Disclosure Frequency Induced Myopia and the Decision to be Public (September 2017). Georgetown McDonough School of Business Research Paper No. 2911412, Available at SSRN: https://ssrn.com/abstract=2911412 or http://dx.doi.org/10.2139/ssrn.2911412

Kevin K. Li

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

Vicki Wei Tang (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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