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Mr. Kyungjin (K.J.) Park
Ph.D. Candidate in Accounting
Smeal College of Business
Pennsylvania State University

Motivated by increased retail investors’ attention and influence on the stock market, I examine whether and how firms change their disclosure behavior in response to retail investor attention. Using data of the online community WallStreetBets as a proxy for retail investor attention, I find a positive association between retail investor attention and disclosure, but only for firms that do not have lottery characteristics. I interpret this result as being due to the fact that retail investors with a gambling purpose invest in firms that have lottery characteristics and focus on market outcomes rather than disclosure. In contrast, non-gambling purpose (i.e., investment purpose) retail investors pay attention to information managers disclose, which can lead to the desire for greater disclosure. In addition, the results show that firms provide more soft and optimistic information in response to retail investor attention, which is a predicted response to retail investors’ unsophisticated nature. Overall, the paper’s results indicate that firms change their disclosure decisions selectively in response to retail investor attention.