Watching from the Sky: Business Observability and Voluntary Disclosure

Date
2021
Authors
Liu, Clark
Qiu, Yancheng
Wang, Shujing
Yeung, P. Eric
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Abstract
Exploiting the staggered releases of satellite traffic data across U.S. retailers, we study how improved business observability affects corporate voluntary disclosure. We document that following satellite traffic data release, firms significantly suppress issuing management forecasts, especially good news forecasts. This result is best explained by management’s incentive to avoid missing its own earnings “guidance” after business observability improves. Consistent with this explanation, we document that good news suppression occurs among quarterly guidance and is more pronounced when institutional ownership, operating uncertainty, or expected litigation risk are higher. When management decides to issue good news forecasts, they also become more qualitative.
Description
Keywords
satellite data, business observability, voluntary disclosure, management forecasts, 8-K filings
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