Investor Sentiment and Form 8K Disclosure

• In Event: Doctoral Interchange Session #2 (Thursday afternoon)
  In Paper Session: Doctoral Interchange Session #2 (Thursday Afternoon)

Abstract

We examine whether overall corporate disclosure – captured via 8K filings - is associated with prevailing investor sentiment. Using the sentiment index from Baker and Wurgler (2006, 2007) as our proxy for sentiment, we find that firms issue more 8K filings when sentiment is low. Further, we find that when sentiment is low, firms issue more voluntary items and more non-negative items in 8K filings. In contrast, when sentiment is relatively high, firms reduce the frequency of 8K filings, of voluntary items, and of non-negative items within 8K filings. Our findings are consistent with firms strategically disclosing more information in an attempt to correct sentiment induced underpricing when sentiment is low and to maintain overpricing when sentiment is high. Further, we investigate whether firms’ strategic disclosures in response to sentiment has capital market consequences. Our results provide preliminary evidence consistent with capital market impacts of those disclosures.

Authors

• Michael Cooper, The University of Utah

• Jing He, The University of Utah

• Marlene A Plumlee, The University of Utah