Managers' Strategic Use of Concurrent Disclosure: Evidence from 8-K Filings and Press Releases

Abstract

This study examines managers' strategic use of concurrent disclosures around the announcement of negative material events. Prior research assumes that press releases issued concurrently with 8-K disclosures relate to the same underlying event that triggered the 8-K filing. However, consistent with managers attempting to increase investor information processing costs for unfavorable information, we find that when managers disclose negative non-earnings 8-K information, they are more likely to issue a concurrent press release about an unrelated event than a press release providing additional context and detail regarding the 8-K event. This effect is stronger for managers with greater incentives to reduce the reaction to negative news. The use of these unrelated press releases appears to successfully reduce the magnitude and speed of the investor reaction to the disclosure of negative 8-K news, as well as the frequency of 8-K downloads. Our findings shed light on a previously unexplored tool managers use to exploit investors' processing capacity constraints to attenuate the reaction to negative news — the issuance of concurrent disclosures about unrelated events.