Redacted Disclosure

Loading...
Thumbnail Image
Penn collection
Accounting Papers
Degree type
Discipline
Subject
Accounting
Funder
Grant number
License
Copyright date
Distributor
Related resources
Author
Verrecchia, Robert E
Weber, Joseph
Contributor
Abstract

In this paper we investigate a firm's decision to redact proprietary information from its material contract filings. Information redaction results when the Security and Exchange Commission (SEC) grants a firm's request to withhold information from investors in its material contract filings, presumably because the information is proprietary. We hypothesize that when firms redact information, measures of adverse selection deteriorate. That is, the redaction of proprietary information from material contracts should be associated with: a larger adverse selection component of the bid-ask spread, reductions in market depth, and lower market turnover. In addition, we conjecture that the decision to redact depends on whether the firm plans on raising capital, the competitiveness of the firm's industry, and the performance of the firm. Overall the results of our analysis generally support our predictions. We find that when firms redact information, contemporaneous measures of the adverse selection component of the bid-ask spread rise, and market depth and share turnover deteriorate; this suggests an increase in adverse selection. We also find firms are less likely to redact when they issue long-term debt and are more likely to redact when they are in a competitive industry or experience losses.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
2006-09-01
Journal title
Journal of Accounting Research
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
Recommended citation
Collection