Private and Public Disclosures and the Efficiency of Stock Prices

REVIEW OF ACCOUNTING STUDIES, Vol 1, No 4, 1997

Posted: 16 Apr 1997

See all articles by Sunil Dutta

Sunil Dutta

University of California, Berkeley - Haas School of Business

Abstract

In this paper I examine the effects of private and public disclosures on the informational efficiency of stock prices. In addition to making a public announcement such as an earnings announcement, a public firm can make private disclosure to an analyst. If the analyst's relative information advantage is below a threshold level, private disclosure to the analyst leads to more efficient stock price. I demonstrate that the allocation of information across market participants is an important determinant of price efficiency. While accounting regulators often argue the need for equal access to information, the paper shows that there are conditions under which a limited amount of informational inequality may lead to more efficient stock prices.

JEL Classification: G14

Suggested Citation

Dutta, Sunil, Private and Public Disclosures and the Efficiency of Stock Prices. REVIEW OF ACCOUNTING STUDIES, Vol 1, No 4, 1997, Available at SSRN: https://ssrn.com/abstract=2941

Sunil Dutta (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

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