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Voluntary Disclosure Of Partially Verifiable Information

Author

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  • Evelyn Korn

Abstract

I consider voluntary disclosure of nonproprietary information. Established research presents two classes of models. Some authors assume that the manager can be sanctioned prohibitively high if he lies. Others assume cheap talk. I analyze a setting with positive but non-prohibitive punishments. In my scenario, misreporting is part of the information equilibrium. To assess the consequences of such misreporting, I present two distinct cases: If the capital market is already well informed about possible firm values prior to the disclosure, the majority of misreportings is detected. If the capital market has only very rough information, misreportings may lead to failures in the market’s valuation and thus damage investors.

Suggested Citation

  • Evelyn Korn, 2004. "Voluntary Disclosure Of Partially Verifiable Information," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 56(2), pages 139-163, April.
    • Handle: RePEc:sbr:abstra:v:56:y:2004:i:2:p:139-163
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    Citations

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    Cited by:

    1. Mirko S. Heinle & Robert E. Verrecchia, 2016. "Bias and the Commitment to Disclosure," Management Science, INFORMS, vol. 62(10), pages 2859-2870, October.
    2. Beyer, Anne & Smith, Kevin C., 2021. "Learning about risk-factor exposures from earnings: Implications for asset pricing and manipulation," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    3. Beyer, Anne & Cohen, Daniel A. & Lys, Thomas Z. & Walther, Beverly R., 2010. "The financial reporting environment: Review of the recent literature," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 296-343, December.
    4. Mark Bagnoli & Susan G. Watts, 2007. "Financial Reporting and Supplemental Voluntary Disclosures," Journal of Accounting Research, Wiley Blackwell, vol. 45(5), pages 885-913, December.
    5. Anne Beyer & Ilan Guttman, 2012. "Voluntary Disclosure, Manipulation, and Real Effects," Journal of Accounting Research, Wiley Blackwell, vol. 50(5), pages 1141-1177, December.
    6. Jürgen Hagmüller & Ulf Schiller, 2006. "Managemententlohnung und Berichterstattungsanreize," Schmalenbach Journal of Business Research, Springer, vol. 58(55), pages 1-23, January.

    More about this item

    Keywords

    Perfect Bayesian Equilibrium; Signaling; Voluntary Disclosure.;
    All these keywords.

    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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