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Credibility of Voluntary Disclosure

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  • Phillip C. Stocken

Abstract

I examine the credibility of a manager's disclosure of privately observed nonverifiable information to an investor in a repeated cheap-talk game setting. In the single-period game no communication occurs. In the repeated game, however, the manager almost always truthfully reveals his private information provided the manager is sufficiently patient, the accounting report is sufficiently useful for assessing the truthfulness of the manager's voluntary disclosure, and the manager's disclosure performance is evaluated over a sufficiently long period. These factors may explain a manager's propensity to release private information to investors.

Suggested Citation

  • Phillip C. Stocken, 2000. "Credibility of Voluntary Disclosure," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 359-374, Summer.
  • Handle: RePEc:rje:randje:v:31:y:2000:i:summer:p:359-374
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    References listed on IDEAS

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    Cited by:

    1. Sinclair-Desgagne, Bernard & Gozlan, Estelle, 2003. "A theory of environmental risk disclosure," Journal of Environmental Economics and Management, Elsevier, pages 377-393.
    2. Andrew Ferguson & Tom Scott & Neil Fargher, 2016. "The determinants and market reaction to Open Briefings: an investor relations option and evidence on the effectiveness of disclosure," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(3), pages 803-843, September.
    3. Archishman Chakraborty & Rick Harbaugh, 2003. "Ordinal Cheap Talk," Claremont Colleges Working Papers 2003-05, Claremont Colleges.
    4. Ruth V. Aguilera & Kurt A. Desender & Mónica López-Puertas Lamy & Jun Ho Lee, 2017. "The governance impact of a changing investor landscape," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(2), pages 195-221, February.
    5. Lunawat, Radhika, 2016. "Reputation effects of information sharing," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 75-91.
    6. Elizabeth Demers & Clara Vega, 2008. "Soft information in earnings announcements: news or noise?," International Finance Discussion Papers 951, Board of Governors of the Federal Reserve System (U.S.).
    7. Olivier Bonroy & Alexis Garapin & Daniel Llerena, 2017. "Changing partners in a cheap talk game: Experimental evidence," International Journal of Economic Theory, The International Society for Economic Theory, pages 197-216.
    8. Van Geyt, Debby & Van Cauwenberge, Philippe & Vander Bauwhede, Heidi, 2014. "Does high-quality corporate communication reduce insider trading profitability?," International Review of Law and Economics, Elsevier, vol. 37(C), pages 1-14.
    9. Di Maggio, Marco, 2009. "Accountability and Cheap Talk," MPRA Paper 18652, University Library of Munich, Germany.
    10. Alok R. Saboo & Rajdeep Grewal, 2013. "Stock Market Reactions to Customer and Competitor Orientations: The Case of Initial Public Offerings," Marketing Science, INFORMS, vol. 32(1), pages 70-88, October.
    11. Chakraborty, Archishman & Harbaugh, Rick, 2007. "Comparative cheap talk," Journal of Economic Theory, Elsevier, vol. 132(1), pages 70-94, January.
      • Archishman Chakraborty & Rick Harbaugh, 2004. "Comparative Cheap Talk," Working Papers 2004-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    12. repec:gam:jsusta:v:9:y:2017:i:12:p:2182-:d:120452 is not listed on IDEAS
    13. James Matthew Moore, 2013. "TSX Stock Repurchase Announcements and the Impact of TSX Disclosure Requirements," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 4(2), pages 19-32, April.
    14. Stephen Baginski & Elizabeth Demers & Chong Wang & Julia Yu, 2016. "Contemporaneous verification of language: evidence from management earnings forecasts," Review of Accounting Studies, Springer, vol. 21(1), pages 165-197, March.
    15. Andy Lardon & Marc Deloof, 2014. "Financial disclosure by SMEs listed on a semi-regulated market: evidence from the Euronext Free Market," Small Business Economics, Springer, vol. 42(2), pages 361-385, February.
    16. repec:spr:reaccs:v:22:y:2017:i:2:d:10.1007_s11142-017-9391-5 is not listed on IDEAS
    17. Shota Otomasa & Atsushi Shiiba & Akinobu Shuto, 2015. "Management Earnings Forecasts as a Performance Target in Executive Compensation Contracts," CARF F-Series CARF-F-368, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    18. Thakor, Anjan V., 2015. "Strategic information disclosure when there is fundamental disagreement," Journal of Financial Intermediation, Elsevier, vol. 24(2), pages 131-153.
    19. Evelyn Korn, 2006. "The Information Content of Mandatory Disclosures," Marburg Working Papers on Economics 200601, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    20. Ying Cao & Linda A. Myers & Albert Tsang & Yong George Yang, 0. "Management forecasts and the cost of equity capital: international evidence," Review of Accounting Studies, Springer, vol. 0, pages 1-48.
    21. Dobler, Michael, 2008. "Incentives for risk reporting -- A discretionary disclosure and cheap talk approach," The International Journal of Accounting, Elsevier, vol. 43(2), pages 184-206.
    22. Marra, T.A., 2001. "The influence of proprietary disclosure costs on the decision to go public," Other publications TiSEM 4411b149-2088-46a4-b771-6, Tilburg University, School of Economics and Management.
    23. Xiaotong Li, 2005. "Cheap Talk and Bogus Network Externalities in the Emerging Technology Market," Marketing Science, INFORMS, vol. 24(4), pages 531-543, October.

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