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Incentives for Voluntary Disclosure

Joshua Ronen

New York University (NYU) - Department of Accounting

Varda Lewinstein Yaari


AFA 2001 New Orleans Meetings; NYU Ctr for Law and Business Research Paper No. 01-005

Rule l0b-5 of the 1934 Securities and Exchange Act allows investors to sue firms for misrepresentation or omission. Since firms are principal-agent contracts between owners, contract designers and privately informed managers, owners are the ultimate firms' voluntary disclosure strategists. We analyze voluntary disclosure equilibrium in a game with two types of owners: expected liquidating dividends motivated (VMO) and expected price motivated (PMO). We find that Rule l0b-5: (i) does not deter misrepresentation and may suppress voluntary disclosure or, (ii) induces some firms to adopt a partial disclosure policy of disclosing only bad news or only good news.

Number of Pages in PDF File: 76

Keywords: Rule l0b-5, disclosure, noisy rational expectations equilibrium, principal-agent contracts, incentives

JEL Classification: G10, G30, K22, D82

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Date posted: April 2, 2001  

Suggested Citation

Ronen, Joshua and Yaari, Varda Lewinstein, Incentives for Voluntary Disclosure (2001). AFA 2001 New Orleans Meetings; NYU Ctr for Law and Business Research Paper No. 01-005. Available at SSRN: https://ssrn.com/abstract=155328 or http://dx.doi.org/10.2139/ssrn.155328

Contact Information

Joshua Ronen (Contact Author)
New York University (NYU) - Department of Accounting ( email )
40 West 4th Street, Suite 400
Suite 10-180
New York, NY 10012-1118
United States
212-998-4144 (Phone)
212-995-4599 (Fax)
HOME PAGE: http://www.stern.nyu.edu/~jronen/
No contact information is available for Varda Lewinstein Yaari
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References:  21
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