Theme：Does Voluntary Disclosure Reduce Liquidity-driven Price Pressure? Evidence from Fire Sales by Mutual Funds
Speaker：Yuan Xie, Professor of Accounting at the Gabelli School of Business, Fordham University
Address：Room 0407, Mingde Business Building
Fire sales by mutual funds represent an exogenous shock to stock liquidity and exert downward pressure to stock prices unrelated to firm fundamentals. We examine whether more voluntary disclosure prior to fire sales alleviates the downward price pressure caused by fire sales. We find that when managers issue more forecasts in the year prior to fire sales, their companies have less negative abnormal stock returns during the quarter of fire sales and experience faster recovery subsequent to fire sales. The mitigating effect of management forecasts on negative stock returns accompanying fire sales is more pronounced when retail investors are more heavily involved in the trading of fire-sale securities. Additional analyses suggest that the endogeneity concern regarding voluntary disclosure is unlikely to drive the main finding. The overall evidence supports the notion that greater transparency in corporate disclosures can alleviate liquidity-driven mispricing.
Yuan Xie is a Professor of Accounting at the Gabelli School of Business, Fordham University. His research focuses on financial intermediaries and their roles in the capital market. His work has been published in the Journal of Financial Economics, Review of Accounting Studies, Auditing: A Journal of Practice & Theory, Journal of Business Finance and Accounting and Accounting Horizons. One of his articles was featured in the Harvard Law School Forum on Corporate Governance and Financial Regulation and in DowJones Financial News. Professor Xie has been invited to serve as reviewer for Contemporary Accounting Research and the Journal of Accounting and Public Policy. He also has been invited to present and discuss papers at national conferences. Professor Xie currently teaches financial accounting and managerial accounting in Fordham's Gabelli School of Business, where he consistently has received very good teaching evaluations.
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