We employ a shock to institutional investor attention developed by Kempf, Manconi, and Spalt (2016) to examine whether investor attention influences firms’ voluntary disclosure decisions.

Using three common voluntary disclosure methods (management guidance, non-GAAP disclosures, and conference calls), we investigate whether a change in investor attention affects firms’ propensity to provide voluntary disclosure and the characteristics of their voluntary disclosure.

Consistent with investors demanding less disclosure when distracted, we find that firms are less likely to provide voluntary disclosure when investors are less attentive. We find that this relation is isolated to the distraction of quasi-indexers, which is consistent with prior studies documenting that quasi-indexer investors affect firms’ disclosure decisions.

We also find that firms’ voluntary disclosures are more precise, less aggressive, and contain less content when investors are less attentive.

Our study stands in contrast to the majority of the investor attention literature, which largely focuses on the capital market consequences of investor attention and how investor attention affects firms’ strategic timing of mandatory disclosure.

By: Riddha Sattam Basu, Northwestern University – Department of Accounting Information & Management, Spencer Pierce, Florida State University – College of Business, and Andrew Stephan, University of Colorado at Boulder Leeds School of Business

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