Why Do Firms File for Confidential Treatment?
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This paper investigates why investment firms file for confidential treatment. While research directed to hedge funds finds that this type of investor files for the confidentiality of information-rich holdings, we find that the average firm files for confidential treatment for more mundane reasons. Specifically, we find that firms with poor performance use confidential treatment requests to hide their badly performing holdings. We further find evidence that that firms use confidential treatment for holdings that are going to be delisted due to a merger or an acquisition. We find no general evidence of outperformance in the confidential treatment holdings of the average filer. Finally, we also found evidence that short term, more sophisticated firms, especially, hedge funds, are more likely to apply for confidential treatments.