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The Interpretation of Information and Corporate Disclosure Strategies

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  • Sunil Dutta

  • Brett Trueman

Abstract

This paper analyzes a setting in which a firm's manager can credibly disclose facts, but not their valuation implications. Consequently, he is uncertain as to how those disclosed facts will be interpreted by investors. Introducing such uncertainty affects the manager's disclosure strategy in two important ways. First, it becomes a function of the market's prior valuation of the firm since that valuation provides a clue as to how future disclosures are likely to be interpreted by investors. Second, the disclosure strategy is no longer characterized, in general, by a single good news/bad news partition of the manager's private information.

Suggested Citation

  • Sunil Dutta & Brett Trueman, 2002. "The Interpretation of Information and Corporate Disclosure Strategies," Review of Accounting Studies, Springer, vol. 7(1), pages 75-96, March.
    • Handle: RePEc:spr:reaccs:v:7:y:2002:i:1:d:10.1023_a:1017931630916
    DOI: 10.1023/A:1017931630916
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