Disclosing a Random Walk

With a Grain of Salt: Uncertain Relevance of External Information and Firm Disclosures

“…Since the equilibrium disclosure threshold is increasing in δ, more impatient managers are more likely to disclose their firm value. 16 It remains to consider the price trend over time. If the manager discloses at date 2, the…”

“…Why does the manager disclose values that are lower than the existing price? The answer is simple-it is because she expects that the present value of the future (expected) market price will be lower if she 16 Extremely impatient managers (δ = 0) disclose only values above v B : they only care about the current period and not about the external information that will reveal in the next period. Extremely patient managers (δ = 1), however, disclose only values above v E .…”