Ex Post Voluntary Disclosure Strategies for Insiders

Posted: 16 Jul 2002

See all articles by Carolyn B. Levine

Carolyn B. Levine

Carnegie Mellon University - David A. Tepper School of Business

Michael Smith

Duke University

Date Written: Undated

Abstract

Asymmetric information between corporate insiders and other market participants can lead to large bid-ask spreads or even a total collapse of trade in financial markets. In this paper, we discuss how the adverse selection problem can be remedied by voluntary disclosures by insiders. When disclosure decisions are made after the insiders become informed, the market participants update their priors both on the information disclosed and the information not disclosed. Insiders then give up some or all of their information advantage to (weakly) increase their profits. These results do not rely on ex ante commitments on the part of the insiders.

JEL Classification: M41, M45, D82, G10

Suggested Citation

Levine, Carolyn B. and Smith, Michael J., Ex Post Voluntary Disclosure Strategies for Insiders (Undated). Available at SSRN: https://ssrn.com/abstract=309781

Carolyn B. Levine

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Michael J. Smith (Contact Author)

Duke University ( email )

Fuqua School of Business PO Box 90120
Durham, NC 27708
United States
919-660-2932 (Phone)
919-660-8038 (Fax)

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