Strategic News Disclosure before Index Recompositions

• In Event: Voluntary Disclosure

Abstract

We investigate firms’ disclosure behavior around index recompositions. Our evidence shows that firms moving up to the Russell 1000 disclose significantly more positive firm-initiated, discretionary news prior to index recompositions, as compared to a control group of non-moving firms. The disclosure strategy carries positive value implications for firms’ market capitalization. Each additional news release increases the probability of successfully switching indexes by approximately one percent.

Authors

• Elisabeth Klaes, Frankfurt School of Finance and Management gGmbH

• Joerg R. Werner, Frankfurt School of Finance & Management

• Christian Wilk, Frankfurt School of Finance and Management