Policy Uncertainty and Corporate Voluntary Disclosure

ABSTRACT We investigate how managers adjust the nature of their voluntary disclosure in response to policy uncertainty. Using a widely used, news-based index of policy uncertainty, we find that although managers issue more forecasts as policy uncertainty rises, this increase is driven by nonearnings guidance rather than earnings guidance. The results are stronger for firms with a history of frequent guidance, lower litigation risk, and less sensitivity to policy uncertainty. When analyzing forecast types, we find that any increase in earnings guidance is concentrated in nonbottom-line earnings, and capital expenditure forecasts show the strongest positive response among nonearnings forecasts. Higher policy uncertainty is also associated with less precise and longer-horizon forecasts. Collectively, these findings suggest that during uncertain periods, managers strategically shift their disclosure away from less predictable, bottom-line metrics and toward more discretionary metrics to mitigate information asymmetry with capital market participants. Data Availability: Data are available from the public sources cited in the text. Wharton Research Data Services (WRDS) was used in preparing this study. This service and the data available thereon constitute valuable intellectual property and trade secrets of WRDS and/or its third-party suppliers. JEL Classifications: D80; D82; E65; M41.