When a company stops being transparent, it’s not just hiding bad news—it’s using silence as a weapon to win a fight with its lenders.
April 15, 2026
Original Paper
Disclosure Incentives and Bondholder Bargaining Power
SSRN · 6564638
The Takeaway
We assume companies disclose less information when they have something to hide from the public or want to avoid a stock price crash. In reality, distressed firms strategically shut down voluntary disclosures to prevent bondholders from coordinating 'holdout' strategies during bankruptcy negotiations. By keeping creditors in the dark, management gains the upper hand by making it harder for lenders to work together for a better deal. This means transparency isn't just a moral value or a regulatory requirement; it is a tactical chip that companies withdraw the moment they feel cornered by their own debt. It reveals that information isn't just about truth—it's about leverage in a high-stakes power struggle.
From the abstract
We study how financially distressed firms adjust disclosure when creditor bargaining power increases. Exploiting the 2014 Marblegate Asset Management v. Education Management Corporation ruling, which unexpectedly strengthened public bondholders' ability to hold out in out-of-court restructurings, we find that distressed firms with publicly traded debt significantly reduce voluntary disclosure following the ruling. The decline is concentrated among firms with high blockholder ownership, consisten