Is There More Voluntary Disclosure if Investors are Better Informed?

Ebert, Michael; Schneider, Georg

doi:10.2139/ssrn.2996194

Cited by 2 publications

(2 citation statements)

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“…Similarly, Kumar et al (2016) demonstrate that the presence of an informed trader increases the likelihood of voluntary disclosure in an initial public offering, because the firm manager must “level the playing field” and attract uninformed traders. Ebert and Schneider (2017) also show that the possibility of the manager's private information being “leaked” to the market can decrease disclosure.…”

Section: Introductionmentioning

confidence: 99%

“…Analytical research on voluntary disclosure with informed traders in the market is limited 6 . Dye (1998) and Ebert and Schneider (2017) examine disclosure to a market with traders who can find out about the firm manager's information endowment. They find that managers disclose more information voluntarily, because it is more difficult for them to pretend to be uninformed.…”

Section: Introductionmentioning

confidence: 99%

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Voluntary Disclosure and Informed Trading*

Petrov

2020

Contemporary Accting Res

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This study analyzes the impact of informed trading on voluntary corporate disclosure in the presence of two factors: the cost of disclosure and the value of a manager's informedness. In the absence of both factors, informed trading has no impact on disclosure even when traders are not certain whether the manager has information. When disclosure is costly, informed trading serves as a free substitute for the disclosure of favorable information, and reduces disclosure. Surprisingly, when the manager's informedness is valuable for the firm, informed trading can also increase disclosure. Traders can discover unfavorable information about the firm, so managers with such information have less incentive to pool with uninformed managers and disclose to show that they are informed. The study also demonstrates that informed trading can have either a positive or a negative effect on firm value by crowding in or crowding out information production in the firm. These results hold for general information structures and are robust if traders can choose how much information can be acquired.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%