Incentives to Disclose Private Information About the Quality of Financially Intermediated Contracts: Theory and Evidence
Posted: 22 Aug 1998
This paper applies Grossman's (1981) analysis of private information disclosure to examine incentives facing managers of financial intermediaries to reveal private financial statement information to their investors. While managers of transparent institutions face incentives to voluntarily disclose costless and ex post verifiable financial statement information, managers of opaque institutions provide a warranty. Hypotheses and empirical surrogates are developed in the setting of voluntary financial disclosures contained in Australian annual pension plan member reports. Results are mostly consistent with hypotheses that managers of defined contribution pension plans face incentives to voluntarily disclose financial information, but are more equivocal for defined benefit pension plan managers.
JEL Classification: D23, M41
Suggested Citation: Suggested Citation