Seminar by Luminita Enache

Sala Seminari – I° piano, Palazzo Levi Cases, Via del Santo 33 - ore 12.30


Seminar by Luminita Enache, Tuck School of Business

Title: The Disclosure of Good versus Bad News: Evidence from the Biotech Industry” (co-authored by Lynn Li, Edward J. Riedl)

Abstract : This paper examines how the type of news affects firms’ voluntary disclosures. Our sample is publicly-traded biotech firms, a setting which provides particularly strong empirical identification via (i) hand-collected product-level disclosures as our dependent variable, and (ii) product-level evidence of individual drugs’ progression through key regulatory milestones towards marketability as our experimental variable. Of note, the disclosures allow us to distinguish firms’ treatment of good news (i.e., when drugs progress towards marketability) versus bad news (i.e., when drugs fail a key milestone). We document three key empirical findings: (i) product disclosure is increasing in good news (consistent with benefits such as reduced information asymmetry); (ii) product disclosure is increasing in bad news (consistent with benefits such as reduced litigation costs); and (iii) product disclosure is higher for good news relative to bad news (consistent with net benefits that are higher). Collectively, our findings suggests that managers perceive benefits associated with disclosure as increasing with the degree of both good and bad news (suggesting a U–shaped pattern), and that the perceived benefits to disclosure are greater for good news relative to bad news (refining the latter insight to suggest a J–shaped pattern).