The relation between earnings surprises and voluntary disclosures of high-tech firms in periods of bad economic news

I document the pattern of, and examine the economic forces associated with, voluntary disclosures made by 100 randomly-selected high-tech firms that experience bad economic news. I estimate cross-sectional regressions to examine the possible sources of variation in the number and information content of voluntary disclosures for these firms. Most prominent among the forces I examine are the interactions of earnings surprise with several economic forces associated with voluntary disclosures, such as litigation risk and short-term debt. I find that (i) when conditioning on higher levels of short-term debt, firms with more negative quarterly earnings changes make a higher number of total disclosures and also make forward-looking statements with more negative (less positive) information content, and (ii) when conditioning on higher levels of litigation risk, firms with more negative quarterly earnings changes make voluntary disclosures that exhibit more negative (less positive) information content. Overall, the evidence from this conditional analysis suggests that it is important to consider how the relation between earnings surprise and voluntary disclosure systematically varies by certain economic forces because the relation may not exist under certain economic scenarios, while it may be prominent under other ones.