Voluntary Disclosure Around Asset Divestitures

38 Pages Posted: 28 Mar 2019

See all articles by Ram Ramanan

Ram Ramanan

SUNY at Binghamton - School of Management; Indian School of Business

Date Written: March 2019


The existence of many markets that a firm simultaneously accesses creates information transfers, wherein the price formed in one market reveals information to another. Specifically, when the firm divests an asset, facilitating the information transfer from the firm's stock market to the divestiture market may be valuable to the firm. With such interaction between markets, the usual intuition of disclosures enhancing information does not always hold. Disclosures may create distracting noise and obscure information signals revealed by the firm's stock price and suppress the information transfer. In such a situation, the firm may withhold disclosure -- even ones whose content may have a positive effect on its valuation -- not to hide anything, but to facilitate the information transfer.

Keywords: voluntary disclosure, asset sales, stock market learning, information transfer

Suggested Citation

Ramanan, Ram, Voluntary Disclosure Around Asset Divestitures (March 2019). Available at SSRN: https://ssrn.com/abstract=3347059 or http://dx.doi.org/10.2139/ssrn.3347059

Ram Ramanan (Contact Author)

SUNY at Binghamton - School of Management ( email )

P.O. Box 6015
Binghamton, NY 13902-6015
United States

Indian School of Business ( email )

Hyderabad, 500032

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