“Advertising and Disclosure: Do Firms Time Advertising during Disclosure Periods?” by Mr Wang Yin
Mr. Wang Yin
PhD Candidate in Accounting
Department of Accounting & Management Control
Using a large sample of monthly advertising data, I examine whether U.S. firms use advertising to increase visibility and attract investor attention to their disclosures. I find that firms schedule some advertising to appear around their SEC 10-K and 10-Q filings, consistent with advertising being used to attract investor attention during disclosure periods. This effect is stronger for firms reporting good news, for firms with high individual investor ownership, for firms in the retail industry, and for young firms. In addition, firms increase their advertising through media with broad target audiences and through business-to-consumer media when they submit 10-K and 10Q filings. Furthermore, I use the SEC acceleration filing rule as an exogenous shock to the timing of firms’ mandatory disclosures. Using a Difference-in-Difference design, I find that advertising expenditures co-move with the change in timing of the 10-K filings. Parallel trend analysis and falsification test results further validate this causal inference that firms’ mandatory disclosures cause the timing of firms’ advertising. Finally, the results also suggest that firms with high information asymmetry and lower market liquidity advertise more when they have disclosures. Taken together, the findings provide new evidence about the real effects of disclosure on firm-specific investment, showing that firms consider disclosure timing when making advertising investment decisions.