Imperfect Information and Credible Communication

Paul E. Fischer and Phillip C. Stocken

Journal of Accounting Research, 2001, vol. 39, issue 1, 119-134

Abstract: This paper analyzes a communication game between a sender and receiver with misaligned incentives. Because of the misalignment, in equilibrium, the sender's privately observed information is not perfectly communicated. We study the relation between the quality of the sender's information and the quality of the information communicated. We establish that the quality of information communicated is a non‐monotonic function of the quality of the sender's information, and it is maximized when the sender has imperfect information. We suggest that our model applies to a setting where an equity research analyst communicates information about a firm's value to investors.

Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:bla:joares:v:39:y:2001:i:1:p:119-134

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Journal of Accounting Research is currently edited by Philip G. Berger, Luzi Hail, Christian Leuz, Haresh Sapra, Douglas J. Skinner, Rodrigo Verdi and Regina Wittenberg Moerman

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