The Social Cost of Strategic Disclosure Timing: Evidence from Vehicle Safety Recalls

Vehicle firms strategically delay large-scaled, safety-related recalls to refinance their historically issued long-term debt prescheduled to mature by the end of the fiscal year in which manufacturing commences. The results are not driven by firms being differentially informed about defects because manufacturing starts at different time points. The effect of maturing debt on recall delay is economically large, strikingly robust to a broad array of checks, and survives from a difference-in-differences design. NHTSA does not time investigations based on corporate debt maturity structure. Firms' self-reported event chronologies to the NHTSA are consistent with their recall timing strategies.