Strategic timing of corporate disclosures : evidence from China

Zhu, Dan (2015) Strategic timing of corporate disclosures : evidence from China. PhD thesis, Prifysgol Bangor University.

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This thesis studies the strategic timing of corporate disclosures in the institutional context of China. It comprises three independent but linked studies which draw on both financial and psychological theories. The focus is on the Chinese setting as the unique regulations governing corporate disclosures enables managers to strategically time their disclosures of quarterly reports. The sample comprises 18273 observations from 2006 to 2012 which covers both A and B shares from the Shanghai and Shenzhen stock exchanges. Firstly, under the Chinese booking system of quarterly report disclosure, I examine whether managers delay the disclosure of bad news relative to good news. The listed firms in China are required to book disclosure dates of quarterly reports before legal disclosure periods, and they are allowed to change the dates after the bookings have been made. Through this booking system, the advance and delay of quarterly report disclosures can be observed directly. Supporting prior literature, I find that managers advance their first booking disclosure dates if quarterly reports reveal good news, but delay them if quarterly reports reveal bad news. I further demonstrate that managers' preference for modifying of first booking dates as a timing strategy appears to occur when they have strong incentives to withhold their firm news and potentially gamble that the subsequent release of relative market conditions could turn in their favor. In line with the prediction of Acharya et al. (2011), my results suggest that managers tend to advance their first booking dates, when relative market conditions are bad. Conversely, they are likely to postpone them, when relative market conditions are good. The second study utilizes the Chinese overlapping legal disclosure period between an annual report of one year and the subsequent first quarterly report to test whether the nature of firm's news in uences the release sequence of the two financial information sources. Mental accounting theory suggests that individuals tend to integrate losses and segregate gains. In line with this theory, I find that managers are willing to release their annual report and subsequent first quarterly report simultaneously if both reports reveal bad news, but separately if both reports reveal good news. When two reports reveal conflicting information, managers are likely to make separate dis-closure, if the annual report reveals good news and the subsequent first quarterly report reveals bad news. In particular, I demonstrate that managers indeed achieve simultaneous and separate disclosure through amending the first booking dates of their annual report and subsequent first quarterly report. Baker and Wurgler (2007) suggest that both high proportions of retail investors and short sale constraints enable Chinese stock markets to be a natural experiment for investor sentiment studies. Therefore, utilizing Chinese data, in the final study, I investigate whether investor sentiment affects managers' decisions of quarterly report disclosures. Since the stock prices tend to be higher during high sentiment periods than low sentiment periods, managers may choose to accelerate the disclosure dates of their quarterly report during the high sentiment periods, conversely, decelerate them during the periods of low sentiment. The results support this and are especially pronounced for firms releasing bad news, who appear to (1) release their firm news earlier than firms with good news when sentiment is high and (2) delay quarterly report disclosures more than firms with good news when sentiment is low.

Item Type: Thesis (PhD)
Subjects: Degree Thesis
Departments: College of Business, Law, Education and Social Sciences > Bangor Business School
Degree Thesis
Date Deposited: 20 Jul 2016 14:19
Last Modified: 20 Jul 2016 14:19
URI: http://e.bangor.ac.uk/id/eprint/6598
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