This paper documents a dual role for disclosure. In addition to the traditional role of alleviating information asymmetry, firms are motivated to disclose to attract investors’ limited resources and order flow away from other firms (Fishman and Hagerty, 1989). In periods when firms returns comove more with their sector's returns and thus face more competition for investors, they issue more guidance, especially capex guidance. The effect of firm-sector comovement ("sector crowdedness") on guidance increases with fiercer competition for investors. Guidance increases liquidity and price efficiency (measured as investment sensitivity to price), but the impact of guidance decreases in sector crowdedness, consistent with the proposition that more disclosure in the crowded sectors is investor-seeking rather than precision increasing. Although the impact of guidance on investment-price sensitivity is lower in more crowded sectors, the effect is still positive, suggesting that firms can improve price efficiency by issuing guidance to attract informed investors to the firm
