Equilibrium voluntary disclosures, asset pricing, and information transfers

Ronald A. Dye and John S. Hughes

Journal of Accounting and Economics, 2018, vol. 66, issue 1, 1-24

Abstract: We study a firm’s manager’s voluntary disclosure decisions and those disclosure decisions’ asset pricing, cost of capital, and information transfer effects in a model where investors trade multiple securities. We: develop new asset pricing formulas when the manager makes no disclosure that impose testable cross-equation restrictions on firms’ market values; develop a wide array of comparative statics; obtain surprising findings about nondisclosure’s effects on investors’ perceptions of uncertainty about firms’ future cash flows; develop simple, interpretable expressions for firms’ cost of capital; and show how no disclosure by one firm generates informational externalities on other firms.

Date: 2018
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:66:y:2018:i:1:p:1-24

DOI: 10.1016/j.jacceco.2017.11.003

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