Do Firms Redact Information from Material Contracts to Conceal Bad News?

• 成果类型: Article
• 署名作者: Bao, Dichu; Kim, Yongtae; Su, Lixin (Nancy)
• 署名单位: Lingnan University; Santa Clara University; Korea Advanced Institute of Science & Technology (KAIST); Hong Kong Polytechnic University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2020-0255
• 发表日期: 2022
• 页码: 29-57
• 关键词: CORPORATE DISCLOSURE; voluntary disclosure; institutional investors; PROPRIETARY INFORMATION; MARKET; TRANSPARENCY; incentives; POLICY; RISK

摘要

The Securities and Exchange Commission (SEC) allows firms to redact information from material contracts by submitting confidential treatment requests if redacted information is not material and would cause competitive harm upon public disclosure. This study examines whether managers use confidential treatment requests to conceal bad news. We show that confidential treatment requests are positively associated with residual short interest, a proxy for managers' private negative information. This positive association is more pronounced for firms with lower litigation risk, higher executive equity incentives, and lower external monitoring. Confidential treatment requests filed by firms with higher residual short interests are associated with higher stock price crash risk and poorer future performance. Collectively, our results suggest that managers redact information from material contracts to conceal bad news.