Should I Stay or Should I Grow? Using Voluntary Disclosure to Elicit Market Feedback
We explore the use of voluntary disclosure by managers to solicit market-feedback. Using managerial capital expenditure forecasts, we find that managers adjust annual capital expenditures upward (downward) in response to positive (negative) stock market reactions to capital expenditure forecasts, but only for those forecast announcements that stimulate rather than discourage informed trading. These capex adjustments motivated by market feedback correlate with higher future performance and are stronger (weaker) when outsiders (managers) are more informed. Finally, we show that managers are more likely to issue and learn from capex forecasts when pre-disclosure stock prices are affected by transitory non-fundamental shocks.