ABSTRACT This paper studies managers' preferences among information acquisition and disclosure policies when their firms are required to engage in "real-time" or "continuous" financial reporting. The paper predicts that for many, but not all, processes describing the distribution of their firms' cash flows, when subject to such reporting requirements, managers will engage in disclosure "bunching," that is, they will bunch the discretionary component of the information they acquire and disclose into a single point in time rather than spread the acquisition and disclosure of that information over time. We show that managers' preferred bunching period depends on managers' strategy for trading in their firms' shares, managers' risk aversion, the risk premium the capital market attaches to firms' shares, and the size of managers' initial ownership stakes in their firms. We also study and characterize how the equilibrium prices of firms' shares vary over time and also how managers' optimal trading strategies vary with their most preferred "bunching" strategies. Several extensions confirm the robustness of the optimality of disclosure "bunching." Copyright (c), University of Chicago on behalf of the Accounting Research Center, 2010.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 48 (2010)
Issue (Month): 3 (06)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0021-8456|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0021-8456|