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Market Performance Measures and Disclosure of Private Management Information in Capital Markets

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  • Peter O. Christensen

    (University of Southern Denmark)

  • Gerald A. Feltham

    (University of British Columbia)

Abstract

Thispaper examines the optimal disclosure policyin a principal/agent setting in which investors and a managerdirectly receive pre-decision, non-contractible signals. Themanager's signal is more informative than the investors' signal.Under no disclosure, the market price provides contractible informationabout the investors' signal, whereas it does not reveal the investors'signal if the manager fully and truthfully discloses his signal.The Revelation Principle does not apply and we identify conditionsunder which no disclosure dominates full disclosure, and providea ``hurdle'' model in which partial disclosure strictly dominatesboth no and full disclosure.

Suggested Citation

  • Peter O. Christensen & Gerald A. Feltham, 2000. "Market Performance Measures and Disclosure of Private Management Information in Capital Markets," Review of Accounting Studies, Springer, vol. 5(4), pages 301-329, December.
    • Handle: RePEc:spr:reaccs:v:5:y:2000:i:4:d:10.1023_a:1026545622749
    DOI: 10.1023/A:1026545622749
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    References listed on IDEAS

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    1. Mitchell A. Farlee, 1998. "Welfare Effects of Timely Reporting," Review of Accounting Studies, Springer, vol. 3(3), pages 289-320, September.
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    3. Gerald A. Feltham & Martin G. H. Wu, 2000. "Public Reports, Information Acquisition by Investors, and Management Incentives," Review of Accounting Studies, Springer, vol. 5(2), pages 155-190, June.
    4. Bushman, Robert M. & Indjejikian, Raffi J., 1993. "Accounting income, stock price, and managerial compensation," Journal of Accounting and Economics, Elsevier, vol. 16(1-3), pages 3-23, April.
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