| This study suggests a model for explaining the information content of financial news. The model focuses on the fact that a firm's information disclosure is observed not only by the capital market, but also by its (uninformed) competitors. A novel feature of the model is the endogeneity of the financial disclosure. Because the actions of a firm's competitors depend on the timing and the nature of financial disclosure, the firm has an incentive to manipulate its disclosure. This interaction is examined in two aspects: information producers' behavior (e.g., disclosure timing) and information users' behavior (e.g., investors' adjustment for the values of disclosing firms and other firms).; The theoretical model in this dissertation provides a structure for understanding systematic patterns with respect to disclosure timing and the correlation between the values of the disclosing firm and other firms in the same industry. The main findings are: (1) managers disclose news earlier (later) than usual when they have information about an unexpected decline (increase) in sales and costs, and (2) a disclosure of industry-common information (sales) produces a positive correlation between the values of the disclosing firm and other firms, while a disclosure of firm-specific information (costs) causes a negative correlation.; The empirical studies have been carried out to investigate the pattern of management's early/late disclosures and capital market investors' response to the disclosure of annual sales and production and financing costs. The results generally support the model's predictions with regard to the disclosure timing. Capital market investors also behave as if they know the interactions among competitors. When a firm reports an increase (a decrease) in its costs, the firm's value goes down (up) and competitors' values go up (down). When the firm discloses an increase (a decrease) in its sales, the values of both firms move up (down).; Moreover, a disclosure lag is found to be associated with such firm characteristics as size and inventory level, a proxy for the auditor's workload. Especially, an auditor's unexpected workload is significantly associated with an unexpected disclosure lag. |
