Not Only What but Also When: A Theory of Dynamic Voluntary Disclosure

Abstract

We study a dynamic model of voluntary disclosure of information by a potentially informed agent. The extant theoretical literature on voluntary disclosure focuses on static models in which an interested party (e.g., a manager of a firm) may privately observe a single piece of private information (e.g., Grossman 1981;Milgrom 1981;Dye 1985;and Jung and Kwon 1988) or dynamic models in which the disclosure timing does not play a role (e.g., Shin 2003Shin , 2006 as the manager's decision is what to disclose but not when to disclose it. Corporate disclosure environments, however, are characterized by multi-period and multi-dimensional flows of information from the firm to the market, where the information asymmetry between the firm and the capital market can be with respect to whether, when, and what relevant information the firm might have learned. For example, firms with ongoing R&D projects can obtain new information about the state of their projects, where the time of information arrival and its content is unobservable to the market. This is common, for example, in pharmaceutical companies that get results of a drug's clinical trial (prior to FDA approval). Such results are not required to be publicly disclosed in a timely manner and investors' beliefs about the result of a drug's clinical trial may have a great effect on the firm's price. The multidimensional nature of the disclosure game (multi-period and multisignal) plays a critical role in shaping the equilibrium; e.g., when deciding whether

Statistical evidence and the problem of robust litigation

“…In the direction of multiple documents, Fluet and Lanzi () and Guttman, Kremer, and Skrzypacz () study settings in which a sender may have more than one signal that can be verifiably disclosed, so there are multiple channels of information. Both assume equilibrium, and they focus on different issues than we address.…”

How Patterns of Past Guidance Provision Affect Investor Judgments: The Joint Effect of Guidance Frequency and Guidance Pattern Consistency

“…Yet, there is little awareness in the existing literature of the implications of the multi-period nature of guidance (Hirst et al 2008). Second, unlike in a single-period setting, a multi-period setting makes guidance provision more informative by allowing investors to form expectations of future guidance based on a firm's guidance provided in the past (e.g., Einhorn and Ziv 2008;Guttman et al 2014). In particular, we focus on two dimensions of a firm's past guidance--guidance frequency and guidance consistency, which we elaborate next.…”

Introduction to the Special Issue Political Games: Strategy, Persuasion, and Learning

“…In all experiments in [5], almost every single subject follows the most recent signal with staggering regularity, regardless of the signal's precision. This finding raises new questions on the timing of information revelation in electoral campaigns, casting further concerns about manipulation of voting behavior (see, for example, [6,7]).…”