Standing in the Limelight: Sophisticated Active Attention and Managerial Bad News Hoarding
33rd Australasian Finance and Banking Conference 2020
76 Pages Posted: 12 Feb 2021 Last revised: 27 Apr 2021
Date Written: January 15, 2020
This paper examines the effect of active attention from sophisticated market participants on managerial bad news hoarding. Using EDGAR searching volume, we first find a positive impact of sophisticated active attention on managerial bad news hoarding measured by stock price crash risk, which can not be explained by general attention from Google and firms’ information supply. Further evidence from option market reaction, management guidance, financial reporting quality, and accounting conservatism further confirms managers’ tendency to hide bad news under greater pressure from sophisticated attention. Two natural experiments are implemented to provide a causal inference. By providing systematic evidence on the impact of sophisticated active attention on managerial bad news hoarding, this paper sheds light on the pressure effect of external attention on managers’ disclosure strategies that have been underexplored in prior literature.
Keywords: sophisticated active attention, EDGAR searching volume, stock price crash risk, bad news hoarding, pressure effect
JEL Classification: G12, G14, G41
Suggested Citation: Suggested Citation