Work

Running without Moving? Corporate Disclosure and Annual Price Discovery in Bad versus Good Times

Year: 2025

Type: article

Abstract: ABSTRACT Ball and Brown (1968) introduce a method to measure accounting earnings’ contribution to price discovery toward the end-of-period price. Building on this method, we examine a comprehensive set of corporate disclosures and document a large gap in their contribution to annual price discovery between bad and good news years (40 percent versus over 60 percent), despite no such difference in stock return variance (partial R2). These patterns are consistent with managers proactively releasing good news to counteract negative news during bad news years. Our finding broadens the concept of news bundling from concurrent releases to intertemporal dynamics within an annual window. Voluntary press releases are a key driver of this disparity in price discovery, adding 3 percent in bad times while being the top contributor in good times (27 percent). Investor private information acquisition contributes to bridging the gap left by corporate disclosures in price discovery during bad news years. Data Availability: Data are available from public sources cited in the text. JEL Classifications: G10; G12; M41.

Source: The Accounting Review

DOI: 10.2308/tar-2023-0504

Authors: Edward Xuejun Li, K. Ramesh, Min Shen, Joanna S. Wu

Institutions: Baruch College, City University of New York, Rice University, George Mason University, University of Rochester

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: bronze

Funder: City University of New York

OpenAlex ID: W4410086023