Timing Complex News to Target Attention

Investors have limited and time-varying attention. These constraints are heterogeneous across investors, which can create asymmetric information and adverse selection problems. We show how firms take these constraints into account: They release harder-to-process news in periods when investor attention is higher. We use an institutional discontinuity within the U.S. corporate filing system to measure these effects. Filings before 5:30 p.m. become available immediately, whereas filings after 5:30 p.m. only become visible the next morning and attract less attention. Firms release longer and more complex news just before the cutoff, giving investors the longest possible period to absorb the information before markets open. Firms experience faster price convergence and more liquidity after precutoff news despite their complexity, which is consistent with the additional attention that they attract. We outline a framework in which the need for investors to spread their attention across different ideas induces firms to file their more complex filings at times when investor attention is higher. Our results are consistent with an equilibrium in which investors pay more attention to complex news and in which firms with complex news time them to target investor attention. This paper was accepted by David Sraer, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2021.03722 .