Insiders' incentives for asymmetric disclosure and firm-specific information flows

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

1 Scopus Citations
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Detail(s)

Original languageEnglish
Pages (from-to)3562-3576
Journal / PublicationJournal of Banking and Finance
Volume37
Issue number9
Publication statusPublished - Sep 2013

Abstract

Recent research suggests that insiders' incentives for capturing cash flows affect price formation process in which insiders are inclined to withhold good news and to accelerate the release of bad news (Jin and Myers, 2006). We investigate whether insiders' incentives for private control benefit, proxied by control-ownership wedge, affect firm-specific return characteristics. We find that control-ownership wedge is negatively related to the likelihood of positive return jumps and positively related to the extent of asymmetric market reaction to good news rather than to bad news. Overall, our results support the notion that corporate insiders increase opaqueness and withhold good news in order to capture unexpected cash flow. © 2013 Elsevier B.V.

Research Area(s)

  • Control-ownership wedge, Jump risks, Stock price informativeness, Timing of disclosure