Bayesian Persuasion in the Presence of Discretionary Disclosure

Friedman, Henry L.; Hughes, John S.; Michaeli, Beatrice

doi:10.2139/ssrn.2666780

Cited by 3 publications

(2 citation statements)

References 72 publications

(49 reference statements)

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“…Finally, our paper also relates to the economics literature of Bayesian persuasion. For examples of other accounting applications of this approach, see, e.g., Friedman et al (2015) and Huang (2015). Kamenica and Gentzkow (2011) study a persuasion game which can be viewed as a cheap talk game with commitment.…”

Section: Related Literaturementioning

confidence: 99%

Properties of optimal accounting rules in a signaling game

Jiang

Yang

2017

Journal of Accounting and Economics

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We characterize the properties of optimal accounting rules in a signaling game. An impatient …rm sells shares to competitive investors. The …rm can signal its private information about the fundamental by retaining a fraction of the shares. In addition, the …rm can commit to disclosing information according to a set of accounting rules chosen ex ante. Information disclosure reduces signaling cost so that perfect disclosure is optimal. When perfect disclosure is impossible, the optimal accounting rule features a lower bound and a summary statistic of the fundamental. The interpretation of the lower bound is consistent with accounting conservatism, and the statistic summarizes the information most relevant to the …rm's valuation. The justi…cation for accounting conservatism relies on the existence of information asymmetry and the infeasibility of perfect accounting disclosure. This is consistent with the conjecture of LaFond and Watts (2008) that information asymmetry calls for accounting conservatism.

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Section: Related Literaturementioning

confidence: 99%

Properties of optimal accounting rules in a signaling game

Jiang

Yang

2017

Journal of Accounting and Economics

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“…In the accounting literature, Friedman et al (2015) study the interaction between persuasion and disclosure in a model with binary signals, which precludes most of the effects we emphasize, while DeMarzo et al ( 2019) and Bertomeu et al (2021) study the incentives for firms to block the release of outside information in a setting without additional inside disclosures. We contribute a novel characterization of optimal, granular outside information that anticipates the associated incentives to disclose in a general framework.…”

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confidence: 99%

Inside and Outside Information

QUIGLEY,

WALTHER

2024

The Journal of Finance

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We study an economy with financial frictions in which a regulator designs a test that reveals outside information about a firm's quality to investors. The firm can also disclose verifiable inside information about its quality. We show that the regulator optimally aims for “public speech and private silence,” which is achieved with tests that give insiders an incentive to stay quiet. We fully characterize optimal tests by developing tools for Bayesian persuasion with incentive constraints, and use these results to derive novel guidance for the design of bank stress tests, as well as benchmarks for socially optimal corporate credit ratings.

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Optimal Disclosure Rule and Efficient Liquidation

Jiang

Yang

2016

SSRN Journal

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Bayesian Persuasion in the Presence of Discretionary Disclosure

Cited by 3 publications

References 72 publications

Properties of optimal accounting rules in a signaling game

Properties of optimal accounting rules in a signaling game

Inside and Outside Information

Optimal Disclosure Rule and Efficient Liquidation

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