Information overload and disclosure smoothing

Kimball L. Chapman, Nayana Reiter, Hal D. White, Christopher D. Williams

Review of Accounting Studies · 2019 · Volume 24 · Issue 4

Abstract

This paper examines whether managers can reduce the detrimental effects of information overload by spreading out, or temporallysmoothing, disclosures. We begin by attempting to identify managerial smoothing. We find that when there are multiple disclosures for the sameevent date, managers spread the disclosures out over several days. Managers are also more likely to delay a disclosure when there has been a disclosure made within the three daysbeforethe event date. Finally, managers are more likely to engage in disclosure smoothing when disclosures are longer, the information environment is more robust, firm information is complex, uncertainty is high, and disclosure news is more positive. Our second set of analyses examines whether there are market benefits to disclosure smoothing. Using two different measures of disclosure smoothing, we find that smoothing is associated with increased liquidity, reduced stock price volatility and increased analyst forecast accuracy.

Keywords

Information overload, Corporate disclosure, Disclosure smoothing, Stock liquidity

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