Market Performance Measures and Disclosure of Private Management Information in Capital Markets

Peter O. Christensen and Gerald A. Feltham
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Peter O. Christensen: University of Southern Denmark
Gerald A. Feltham: University of British Columbia

Review of Accounting Studies, 2000, vol. 5, issue 4, No 2, 329 pages

Abstract: Abstract Thispaper examines the optimal disclosure policyin a principal/agent setting in which investors and a managerdirectly receive pre-decision, non-contractible signals. Themanager's signal is more informative than the investors' signal.Under no disclosure, the market price provides contractible informationabout the investors' signal, whereas it does not reveal the investors'signal if the manager fully and truthfully discloses his signal.The Revelation Principle does not apply and we identify conditionsunder which no disclosure dominates full disclosure, and providea ``hurdle'' model in which partial disclosure strictly dominatesboth no and full disclosure.

Keywords: Private management information; non-contractible investor information; market based incentives (search for similar items in EconPapers)
Date: 2000
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DOI: 10.1023/A:1026545622749

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