Disclosure Spontaneity and Managers’ Explanations for Performance

There is considerable variation across firms and disclosure settings in the level of advance preparation for disclosures. Further, disclosures that involve less preparation are more spontaneous and can affect market outcomes. Despite this, little is known about how spontaneity affects disclosure characteristics. Using an experiment and a survey, we investigate how managers’ explanations for performance differ when issued more spontaneously. Our experiment varies cognitive load and task performance in a 2x2 between-participants design, and asks participants to report the reasons for their performance on an abstract task. We find that participants provide more internal reasons for performance when they respond more spontaneously following both good and poor performance. A follow-up survey of IROs documents reasons for different amounts of disclosure preparation, as well as potential consequences. Our results shed light on why managers invest in different levels of disclosure preparation, and provide evidence on how disclosure spontaneity affects disclosure characteristics.