Strategic Withholding and Imprecision in Asset Measurement

Jeremy Bertomeu, Edwige Cheynel and Davide Cianciaruso ()
Additional contact information
Jeremy Bertomeu: Washington University in St. Louis - John M. Olin Business School
Edwige Cheynel: Washington University in St. Louis - John M. Olin Business School
Davide Cianciaruso: HEC Paris

No 1324, HEC Research Papers Series from HEC Paris

Abstract: How precise should accounting measurements be, if management has discretion to strategically withhold? We examine this question by nesting an optimal persuasion mechanism, which controls what measurements are conducted, within a voluntary disclosure framework a la Dye (85) and Jung and Kwon (1988). In our setting, information has real effects because the firm uses it to make a continuous operating decision, increasing in the market's belief. Absent frictions other than uncertainty about information endowment, we show that imprecision can reduce strategic withholding but always decreases firm value. We then examine plausible environments under which, by contrast, there is an optimal level of imprecision featuring coarseness at the marginal discloser. We offer additional implications in the contexts of enforcement against strategic withholding and financing with collateralized assets.

Keywords: real effects; imprecision; voluntary disclosure; accounting standards (search for similar items in EconPapers)
JEL-codes: G30 M40 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2018-12-18
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3293414 Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1324

DOI: 10.2139/ssrn.3293414

Access Statistics for this paper

More papers in HEC Research Papers Series from HEC Paris HEC Paris, 78351 Jouy-en-Josas cedex, France. Contact information at EDIRC.
Bibliographic data for series maintained by Antoine Haldemann ().