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.
Review of Accounting Studies – Springer Journals
Published: Oct 16, 2004
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