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Disclosure to an Audience with Limited Attention

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Author Info
David Hirshleifer (Fisher College of Business, Ohio State University)
SONYA SEONGYEON LIM (DePaul University)
Siew Hong Teoh (Fisher College of Business, Ohio State University)

Additional information is available for the following registered author(s):

Abstract

In our model, informed players decide whether or not to disclose, and observers allocate attention among disclosed signals, and toward reasoning through the implications of a failure to disclose. In equilibrium disclosure is incomplete, and observers are unrealistically optimistic. Nevertheless, regulation requiring greater disclosure can reduce observers' belief accuracies and welfare. A stronger tendency to neglect disclosed signals increases disclosure, whereas a stronger tendency to neglect failures to disclose reduces disclosure. Observer beliefs are influenced by the salience of disclosed signals, and disclosure in one arena can crowd out disclosure in other fundamentally unrelated arenas.

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File URL: http://129.3.20.41/eps/game/papers/0412/0412002.pdf
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Publisher Info
Paper provided by EconWPA in its series Game Theory and Information with number 0412002.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 49 pages
Date of creation: 04 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpga:0412002

Note: Type of Document - pdf; pages: 49. PDF
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Web page: http://129.3.20.41

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Related research
Keywords: Disclosure policy; disclosure regulation; limited attention; behavioral economics; behavioral accounting; behavioral finance; market efficiency; psychology and economics;

Other versions of this item:

Find related papers by JEL classification:
M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  2. Siew Hong Teoh, 1997. "Information Disclosure and Voluntary Contributions to Public Goods," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 385-406, Autumn. [Downloadable!] (restricted)
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    Other versions:
  7. Bernard, Victor L. & Thomas, Jacob K., 1990. "Evidence that stock prices do not fully reflect the implications of current earnings for future earnings," Journal of Accounting and Economics, Elsevier, vol. 13(4), pages 305-340, December. [Downloadable!] (restricted)
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    Other versions:
  10. Peter Klibanoff & Owen Lamont & Thierry A. Wizman, 1998. "Investor Reaction to Salient News in Closed-End Country Funds," Journal of Finance, American Finance Association, vol. 53(2), pages 673-699, 04. [Downloadable!] (restricted)
  11. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January. [Downloadable!] (restricted)
  12. Hirshleifer, David & Teoh, Siew Hong, 2003. "Limited attention, information disclosure, and financial reporting," Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 337-386, December. [Downloadable!] (restricted)
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    Other versions:
  16. Verrecchia, Robert E., 1983. "Discretionary disclosure," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 179-194, April. [Downloadable!] (restricted)
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    Other versions:
  24. Teoh, Siew Hong & Hwang, Chuan Yang, 1991. "Nondisclosure and Adverse Disclosure as Signals of Firm Value," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 4(2), pages 283-313. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9164, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Hirshleifer, David & Teoh, Siew Hong, 2005. "Limited Investor Attention and Stock Market Misreactions to Accounting Information," Working Paper Series 2005-24, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  3. Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2005. "Information Acquisition: Experimental Analysis of a Boundedly Rational Model," Levine's Bibliography 666156000000000480, UCLA Department of Economics. [Downloadable!]
  4. Hirshleifer, David & Lim, Sonya Seongyeon & Teoh, Siew Hong, 2006. "Driven to distraction: Extraneous events and underreaction to earnings news," MPRA Paper 3110, University Library of Munich, Germany, revised 16 Apr 2007. [Downloadable!]
  5. Mark Bagnoli & Stanley Levine & Susan G. Watts, 2005. "Analyst estimation revision clusters and corporate events, Part II," Annals of Finance, Springer, vol. 1(4), pages 379-393, October. [Downloadable!] (restricted)
  6. Stefano DellaVigna & Joshua M. Pollet, 2005. "Attention, Demographics, and the Stock Market," NBER Working Papers 11211, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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