Industry Sensitivity to External Forces and Firm-Level Disclosure

• In Event: Industry, Macro Economy, and Firm Disclosure

Abstract

This paper examines how exposure to external uncertainty affects corporate disclosure choices. We use industry analysts’ estimate of the sensitivity of a firm’s industry to external forces to measure the firm’s exposure to external uncertainty. We show that firms with greater exposure to external uncertainty are less likely to provide management earnings forecasts, and the forecasts they provide are less specific. Also, the impact of management forecasts in reducing information asymmetry is positively associated with the firms’ exposure to external uncertainty. Finally, as expected, all of the above results are more pronounced during periods of higher market-wide uncertainty.

Authors

• Ashiq Ali, University of Texas-Dallas

• Dan Amiram, Columbia University Business School

• Alon Kalay, Columbia University Business School

• Gil Sadka, University of Texas at Dallas