Journal of Accounting and Economics 68(2-3), 2019 Understanding the 'Numbers Game' (with Andrew Bird and Stephen Karolyi) Our findings suggest that policies designed to “level the playing field” by publicizing internal information can have significant unintended consequences by reducing the informativeness of prices for real decisions. This crowding out effect is stronger when outsiders' incentives for gathering information are stronger and for firms that rely more on external information. We find that the staggered introduction of EDGAR reduced the sensitivity of firm investment to prices, consistent with prices being less informative to managers due to the crowding out of external information gathering. By publicizing corporate filings, the SEC's EDGAR web platform reduces the cost of acquiring internal information for outsiders and so makes it relatively less attractive to gather external information. We study whether and how publicizing internal information affects the value of financial markets to the real economy. Idea: Level-the-playing-field policies that make internal information more available to market participants can crowd out information gathering by markets that is important to efficient managerial decisions. More is Less: Publicizing Information and Market Feedback (with Andrew Bird, Stephen Karolyi, and Phong Truong) Market reactions to announcements of material covenant violations when lenders have short-term incentives are 0.88% lower, suggesting that short-termism spillovers are value-decreasing for borrowers. Affected borrowers switch lenders more frequently, receive worse loan terms on future loans, and reduce investment. Further, they target relatively higher quality borrowers with which they have a prior relationship and that are less financially constrained. We find that lenders with short-termism incentives enforce material covenant violations at higher rates. To meet short-term benchmarks, lenders may alter their monitoring behavior, providing a channel for short-termism incentives to spill over into the corporate sector. Nothing on this web site should be considered a solicitation to buy or an offer to sell shares of any Fund in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction.Idea: Lenders manage earnings to meet short term benchmarks by enforcing contractual breaches by borrowers at a higher rate. The Funds are offered only to United States residents, and information on this site is intended only for such persons. Please read the prospectus carefully before investing. Please read the appropriate Fund’s prospectus for a detailed explanation of all Fund risks.Įach Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. Investors may also be subject to multiple levels of fees and expenses, underlying manager risk, valuation risk, high portfolio turnover risk, limited control over underlying managers, arbitrage risk, special situation risk, equity, bond and asset-backed securities risk, foreign risk, currency risk, credit risk, distressed securities risk, interest rate risk, IPO risk, small-cap risk, and credit default swaps risk. The Funds are also subject to some or all of the following risks: limited operating history industry concentration risk non-diversified risk multi-manager risk repurchase offers limited liquidity risk leverage and derivative risk legal, tax and regulatory risk and non-qualification as a regulated investment company under the Code. The Funds are appropriate only for investors who can tolerate a high degree of risk, do not require liquid investments, and are able to sustain a complete loss of their investment. The Funds should be considered speculative investments and there is no guarantee the Funds will successfully achieve their investment objectives. Diversification does not assure a profit or protect against a loss in a declining market. The Funds are distributed by First Trust Portfolios L.P., an affiliate of First Trust Capital Management L.P. is the Advisor to First Trust Merger Arbitrage Fund, First Trust Multi-Strategy Fund, First Trust Alternative Opportunities Fund, First Trust Real Assets Fund, First Trust Private Credit Fund, First Trust Private Assets Fund and Infinity Core Alternative Fund (collectively, the “Funds.”).
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