The voluntary disclosure literature in accounting has long debated whether managers have a tendency to withhold bad news. However, these studies have been conducted in settings in which, ex-ante, the trade-off be-tween potential benefits and potential costs of withholding information is obscure. In this paper, we study volun-tary disclosure choices using a context rich setting of distressed firms in which potential benefits from withhold-ing news (particularly bad news) are seemingly high whereas the potential costs are seemingly low. Specifically, we focus on the question how ‘going concern’ uncertainty affects voluntary disclosure choices. Our results sug-gest that as financial distress intensifies, there is a lower likelihood and frequency of management earnings fore-casts, indicating that managers may be withholding news, particularly bad news, in distressed firm-years. For comparative purposes, we also present results for safe firm-years and find that managers have a tendency to dis-close bad news as the financial health of the firm worsens.
Supplementary notes can be added here, including code and math.