Strategic information disclosure when there is fundamental disagreement

Anjan Thakor ()

Journal of Financial Intermediation, 2015, vol. 24, issue 2, 131-153

Abstract: This paper develops a theory of strategic information disclosure with disagreement. Managers of firms are voluntarily communicating subjective information, and prior beliefs about the strategy to maximize project value are rational but heterogeneous, potentially generating fundamental disagreement. Three main results are derived. First, not all firms disclose (subjective) information about strategy. Second, more valuable firms, and those whose strategies investors are more likely to agree with, disclose less information in equilibrium. Third, improved corporate governance leads to lower executive compensation and less information disclosure. An implication of the analysis for banks is that greater strategic information disclosure may increase the probability of bank runs—banks may choose to be opaque because transparency makes them fragile.

Keywords: Strategic information disclosure; Disagreement; Subjective information (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:24:y:2015:i:2:p:131-153

DOI: 10.1016/j.jfi.2013.12.001

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