Optimal Disclosure and Fight for Attention

Schneemeier, Jan

doi:10.2139/ssrn.2938045

Cited by 3 publications

(1 citation statement)

References 69 publications

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“…8 6 Examples of voluntary disclosure models with risk-averse, but uninformed traders include Verrecchia (1983), Cheynel (2013), Jorgensen and Kirschenheiter (2015), and Dye and Hughes (2018). 7 Examples of models in which the firm can commit ex ante to a disclosure policy include Xiong and Yang (2021), Schneemeier (2019), andCianciaruso, Marinovic, andSmith (2023). More generally, Diamond (1985), Kurlat and Veldkamp (2015), Banerjee, Davis, and Gondhi (2018), and Goldstein and Yang (2019) show how public disclosures affect the extent to which investor information is reflected in prices.…”

Section: Related Literaturementioning

confidence: 99%

Disclosing to Informed Traders

BANERJEE,

MARINOVIC,

SMITH

2023

The Journal of Finance

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We develop a model in which a firm's manager can voluntarily disclose to privately informed investors. In equilibrium, the manager only discloses sufficiently favorable news. If the manager is known to be informed but disclosure is costly, the probability of disclosure increases with market liquidity and the stock trades at a discount relative to expected cash flows. However, when investors are uncertain about whether the manager is informed, disclosure can decrease with market liquidity and the stock can trade at a premium relative to expected cash flows. Moreover, contrary to common intuition, public information can crowd in more voluntary disclosure.

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