This study examines the properties of innovation disclosures contained in new product announcements (NPAs), a form of voluntary, non-financial disclosure. We analyze these properties using a novel, text-based measure of the extent of product innovation disclosed in NPAs. We find that stock prices react more positively to NPAs with more extensive innovation disclosure. In our main analyses, we first find that a higher level of innovation disclosure predicts a greater increase in future sales. We further find that this predictive ability is reduced when managers have stronger incentives to maximize their wealth, and when the corporate governance structure and customers’ bargaining power are weaker. Our research enhances the understanding of the properties of managerial voluntary, non-financial disclosures and contributes a text-based measure of innovation that captures managerial assessment of the extent of innovation in new products. This new measure is more generalizable and incrementally informative for firm value and future performance than conventional innovation measures that depend on the existence of patents or research and development expenses.Yuan He acknowledges financial support from the National Natural Science Foundation of China (No. 72202189; No. 72232007) and Fundamental Research Funds for the Central Universities (No. 20720221055)
