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To Protect Or To Hide: An Investigation On Corporate Redacted Disclosure Motives Under New Fast Act Regulation, Yan Ma, Qian Mao, Nan Hu
To Protect Or To Hide: An Investigation On Corporate Redacted Disclosure Motives Under New Fast Act Regulation, Yan Ma, Qian Mao, Nan Hu
Research Collection School Of Computing and Information Systems
China adopted amendments allowing companies to redact filings without prior approval in 2016. Leveraging this change as a quasi-nature experiment, we explore whether managers utilize redacted information to withhold bad information in the more lenient regulatory environment. Our investigation uncovers a significant shift in managerial behavior: Since 2016, managers incline to employ redactions to obscure negative news rather than safeguarding proprietary data. Furthermore, we find that the poorer firm performance and a higher cost of equity are associated with the redacted disclosures after 2016, suggesting that investors perceive an increase in firm-specific risk attributed to withholding bad news through redactions.