Disclosure and Exchange of Inside Information

Rui Cao and Yongli Zhang

International Review of Finance, 2021, vol. 21, issue 1, 183-207

Abstract: This paper investigates how cooperation of stock analysts can affect voluntary disclosures of corporate inside information. Previous studies show that corporate insiders have incentives to disclose the information commonly shared by stock analysts, taking stock analysts’ actions as given. We focus on the strategic interactions between corporate insiders and stock analysts, and between stock analysts themselves. We show that voluntary disclosures may occur only when stock analysts intend to share their specialized information. In some sense managers are “forced” to disclose information because if they do not, stock analysts’ information sharing would put them at a disadvantage. Our results highlight the role of information exchange between stock analysts in stimulating voluntary disclosures, and provide an alternative explanation of managers’ motives for voluntary disclosures.

Date: 2021
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International Review of Finance is currently edited by Bruce D. Grundy, Naifu Chen, Ming Huang, Takao Kobayashi and Sheridan Titman

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