No News is Good News: Voluntary Disclosure in the Face of Litigation

65 Pages Posted: 26 Jan 2014 Last revised: 1 Oct 2014

See all articles by Ivan Marinovic

Ivan Marinovic

Graduate School of Business, Stanford University

Felipe Varas

Duke University

Date Written: September 5, 2014


This paper studies dynamic disclosure when the firm value evolves stochastically over time. The presence of litigation risk, arising from the failure to disclose unfavorable information, not only prompts bad news disclosures but also crowds out good news disclosures. The manager's disclosure policy and the overall amount of information transmission depend on the persistence of shocks, as managers may delay the release of negative information in an attempt to bet for resurrection. From a policy perspective, we show that a harsher legal environment may be a cost-effective way of stimulating information transmission in settings where the nature of information is highly proprietary.

Keywords: Dynamic Disclosure, Certification, Litigation

JEL Classification: D82, D83, D84

Suggested Citation

Marinovic, Ivan and Varas, Felipe, No News is Good News: Voluntary Disclosure in the Face of Litigation (September 5, 2014). Rock Center for Corporate Governance at Stanford University Working Paper No. 169, Stanford University Graduate School of Business Research Paper No. 13-19, Available at SSRN: or

Ivan Marinovic (Contact Author)

Graduate School of Business, Stanford University ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Felipe Varas

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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