Market reaction to corporate disclosures of hyped emerging technologies

Gao, Pengfei ORCID: https://orcid.org/0009-0008-7818-1231 2023. Market reaction to corporate disclosures of hyped emerging technologies. PhD Thesis, Cardiff University. Item availability restricted.

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Abstract

The literature identifies that investor overreact to the corporate disclosure of Blockchain during the Blockchain mania. However, emerging technologies (hereafter ETs) are not always monolithic. Assuming that investors are all Fintech fans and ignoring the blossoming of other ETs fails to capture the true investor reaction to firms making disclosures related to ETs. Thus, this thesis examines investor reactions to corporate disclosure of a broad range of ETs using the Gartner Hype Cycle (hereafter GHC). Focusing on all US firms’ initial 8-K filing each year from 2010 to 2019, this research uses textual analysis to find firms disclosing ETs. First, I use an event study method to investigate the immediate and delayed reaction among investors to the disclosure of ETs. While the immediate reaction of investors is positive, this will be reversed shortly. Further, the GHC categorises ETs into five different phases according to the level of market hype, which provides the conditions for this research to compare the differences in market reactions to a firm’s disclosure of ETs at different phases. The findings suggest that investors react differently to the disclosure of ETs during different hyped phases of the GHC. Second, this research illustrates that the reason for the reversal of the delayed investor reaction to ETs disclosures is insider selling and further validate the robustness of the results when other events are excluded. The research also suggests that investors react negatively in the short-term to the intensity and frequency of ETs’ disclosure. Regarding the different phases of market hype, investors’ positive immediate reaction can only be observed for the disclosure of ETs at the ‘innovation trigger’ and the ‘peak of inflated’ phases while the disclosure ETs at the ‘peak of inflated’ phase receives opposite reactions. Third, this research demonstrates that the disclosure of ETs increases stock price crash risk. Although according to signalling theory investors would see the disclosure as a possibility for the firm to actively participate in the technological wave for growth, the increased level of information asymmetry due to hidden potential risks and uncertainties leads to an increased risk of a share price crash. The relationship is made more pronounced by investors’ short-term fervour for such disclosures and CEOs’ overconfidence. However, this situation was reversed when the firm chose to disclose ETs at the phase of ‘plateau of productivity’.

Item Type:	Thesis (PhD)
Date Type:	Completion
Status:	Unpublished
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General)
Uncontrolled Keywords:	Market Reaction, Corporate Disclosure, Hyped Emerging Technologies, Gartner Hype Cycle, 8-K filings, Textual Analysis
Date of First Compliant Deposit:	1 March 2024
Last Modified:	01 Mar 2024 10:24
URI:	https://orca.cardiff.ac.uk/id/eprint/166633

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