Silence is safest: Information disclosure when the audience’s preferences are uncertain

Philip Bond and Yao Zeng

Journal of Financial Economics, 2022, vol. 145, issue 1, 178-193

Abstract: We examine voluntary disclosure decisions when firms are uncertain about audience preferences and are risk averse. In contrast to classic “unraveling” results, some firms remain silent in equilibrium. Silence is safer than disclosure; silence reduces the sensitivity of a firm’s payoff to audience preferences. Increases in firm (audience) risk-aversion reduce (increase) disclosure. Our model explains why some firms do not disclose earnings breakdowns, executive compensation, or Environmental, Social, and Governance (ESG) performance when they face diverse audiences, and why they disclose less under regulatory rules mandating that disclosure be entirely public.

Keywords: Information disclosure; Risk-aversion; Uncertainty; Preferences (search for similar items in EconPapers)
JEL-codes: D81 D82 D83 G14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:145:y:2022:i:1:p:178-193

DOI: 10.1016/j.jfineco.2021.08.012

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