Disagreements among Shareholders over a Firm's Disclosure Policy

Oliver Kim

Journal of Finance, 1993, vol. 48, issue 2, 747-60

Abstract: This paper examines the issue of voluntary disclosure of information by firms with heterogeneous shareholders. It shows that, in a rational expectations setting, better-informed shareholders prefer less disclosure than less well-informed shareholders. This is due to differences in the adverse risk-sharing effect and the beneficial cost-saving effect of disclosure among shareholders with different risk tolerances and information acquisition cost functions. The presence of individual liquidity shocks is shown to reduce shareholder disagreements regarding a firm's disclosure policy. Copyright 1993 by American Finance Association.

Date: 1993
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