Investor Uncertainty and Voluntary Disclosure

We examine whether managers respond to unexpected increases in investor uncertainty by accelerating the release of relevant information. If managers possess firm-specific information that could help resolve uncertainty among investors, we expect them to release it in a timely manner, independent of the nature of the news. Using a global panel containing observations from 33 countries over the 2004 to 2019 period, we find evidence consistent with this prediction. We identify unexpected increases in investor uncertainty by extreme stock price movements and show that firms are both more likely to issue voluntary disclosure and timelier in doing so after such shocks. The results are stronger when managers are likely endowed with more private information but mitigated or even opposite when the sources of investor uncertainty are macroeconomic rather than firm-specific factors. The voluntary disclosure following information shocks contains more verifiable, financial information and is more value relevant to investors as measured by absolute announcement returns and trading volume. Overall, our findings suggest that management responds to increased demand for information in times of investor uncertainty.