Strategic Disclosure, Price Informativeness, and Efficient Investment

Disclosing to Informed Traders

“…Finally, we consider a model without real effects (e.g., production) or feedback effects. As an interesting extension, one could consider the possibility that managers use their disclosure policy to elicit information from the market and inform their investment choices, similar to Lassak (2020)'s analysis in a single‐investor setting. Alternatively, one might consider how voluntary disclosure influences the incentives of managers to invest, as in Ben‐Porath, Dekel, and Lipman (2018), when investors possess private information.…”

Risk information, investor learning, and informational feedback

“…This focus is consistent with a setting where a firm is required by a regulation to provide risk information, e.g., financial-reporting requirements. In contrast, Lassak (2021) and Schneemeier ( 2021) study feedback-effects models that are better suited towards studying voluntary disclosure of risk information. They find that firms may voluntarily disclose information that raises investors' risk perceptions in order to increase investors' incentives to acquire information.…”

“…In contrast, in my model, risk information has no impact on the expected amount of information in prices, but nevertheless influences real efficiency by increasing the amount of information in prices when the firm benefits the most from this information. Relatedly, recent work by Schneemeier (2021), Petrov (2020), and Xiong andYang (2021), andLassak (2021) consider how voluntary disclosure on the level of cash flows influences managers' ability to learn from price. Dye and Sridhar (2002) and Langberg and Sivaramakrishnan (2010) also study models in which disclosure enhances feedback.…”