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Voluntary disclosure with a strategic opponent

Authors
Journal
Journal of Accounting and Economics
0165-4101
Publisher
Elsevier
Publication Date
Volume
12
Issue
4
Identifiers
DOI: 10.1016/0165-4101(90)90020-5

Abstract

Abstract This paper analyzes voluntary disclosure strategies of a privately informed firm when the information is relevant for the market price of the firm and also for an opponent. Favorable information increases the market price but might induce the opponent to take a discrete action that imposes proprietary costs on the firm. It is shown that there is always a full-disclosure equilibrium. There can exist partial-disclosure equilibria with two nondisclosure intervals. Comparative statics show some counter-intuitive results, e.g., higher proprietary costs or higher risk of an adverse action can make disclosure of favorable information more or less likely.

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