A Game of Disclosing “Other Events”: Insights for Retail Investors
Prof. Tao SHU
Fung King Hey Memorial Chair Professor of Finance,
Chairman of the Department of Finance,
The Chinese University of Hong Kong
Date: 10 October 2024 (Thursday)
Time: 10:30 – 12:00
Venue: E22-G008
Host: Prof. Jing XIE, Associate Professor in Finance and Prof. Endong YANG, Assistant Professor in Finance
Abstract
We document that firms distort the information in the lightly scrutinized, voluntary, yet frequent “Other Events” (OE) press releases that account for one-fourth of all 8-K filings. The distortion results in a significant immediate price response that fully reverses in the post-disclosure period. Corroborating distortion, 1) a ChatGPT-interpreted latent topics analysis reveals more pronounced price responses in hard-to-verify non-financial OE disclosures, 2) OE sentiment negatively predicts future operating performance, and 3) these findings do not exist for more regulated non-OE 8-K filings. We find that retail investors, compared with sophisticated investors, particularly suffer from this sentiment distortion, as evidenced by their information acquisition and trading activities. In contrast, OE sentiment distortion benefits managers and firms in corporate events such as insider sales, option grants, equity offerings, and stock M&A.
Speaker
Prof. Tao SHU is the Fung King Hey Memorial Chair Professor of Finance and Chairman of the Department of Finance at The Chinese University of Hong Kong (CUHK) Business School. Before he joined CUHK Business School in 2023, Prof. SHU was the Associate Vice President, Presidential Chair Professor of the Chinese University of Hong Kong, Shenzhen; Associate Director of Shenzhen Finance Institute, Director of MSc Programme in Finance, Co-Director of Hong Kong-Shenzhen Finance Research Centre, Director of Capital Markets and Asset Management Research Centre. Prof. SHU received his PhD in Finance from McCombs School of Business, the University of Texas at Austin in 2007. He worked for the Terry College of Business at the University of Georgia as an Assistant Professor, an Associate Professor with tenure, and Macfadden Endowed Professor of Personal Financial Management. He was also a Visiting Scholar at the Federal Reserve Bank of Atlanta. Prof. SHU joined the Chinese University of Hong Kong, Shenzhen in 2019. His primary research interests include institutional and individual investors, mergers and acquisitions, empirical asset pricing, behavioural finance, and financial accounting. He has published many papers in top academic journals in finance, accounting and management, served on the committees of top international conferences in finance, and served as reviewers for the top academic journals.
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