Disclosure, Materiality Thresholds, and the Cost of Capital: Evidence from Federal Open Market Committee Announcements.

This article investigates how firms’ disclosure decisions respond to surprise changes in U.S. monetary policy, specifically unexpected shifts in the Federal Open Market Committee (FOMC) target federal funds rate (FFR). Using the monetary policy exposure (MPE) index to identify firms sensitive to monetary policy shocks, the study finds that unexpected decreases (increases) in the FFR lead to increased (decreased) disclosure, particularly in materiality-based Form 8-K filings, press releases, and management forecasts. The results support the “materiality hypothesis,” which posits that changes in the cost of equity capital alter firms’ materiality thresholds and thus their disclosure behavior, rather than the “uncertainty hypothesis” that links disclosure changes primarily to financing needs. Additional analyses show that these disclosure changes are not driven by concurrent capital raising or managerial “hype,” and that the findings hold across alternative empirical specifications and reconcile with related research on financing channels.