The Cost Of Hiding Negative News

We recently came across research originally published in October 2022¹ titled “Manager's Strategic Use of Concurrent Disclosures.” The study examined nearly 50,000 non-earnings related 8-Ks over a 14-year period where a firm also issued a press release. One of its key findings was that management teams were more likely to issue an unrelated press release when the news in the 8-K was negative. It also found that management teams were more likely to issue negative news on a Friday or after market hours. The research itself is interesting and expands upon prior work² that disclosure processing is costly to investors and can lead to short-term mispricing of stocks. 

These findings are certainly not shocking. Bundling news or downplaying negative news are tactics that have been employed for as long as we can remember. And while scientific research on the prevalence of such clever tactics or on the existence of information processing costs for investors can be