Voluntary Information Disclosure with Heterogeneous Beliefs

25 Pages Posted: 24 May 2019 Last revised: 30 Mar 2020

See all articles by xia Liu

xia Liu

affiliation not provided to SSRN

Shancun Liu

Beihang University (BUAA) - School of Economic and Management Science

Lei Lu

Asper School of Business, University of Manitoba

Yongdong Shi

Dongbei University of Finance and Economics (DUFE)

Xiong Xiong

Tianjin University

Date Written: March 29, 2020

Abstract

We present a model in which an insider (i.e., manager or CEO) and an informed outsider (i.e., analyst or professional) have heterogeneous beliefs on their shared information about a risky asset and analyze the insider’s incentive to voluntarily disclose this information to the public. We find that, with heterogeneous beliefs, the insider and informed outsider exploit their shared information differently and this might give rise to the insider’s voluntary disclosure of this shared information to the public to seek excess profits. Specifically, the insider is more likely to release the information to the public when she has a greater relative information advantage (due to her private information) than the informed outsider and that the informed outsider is overconfident in the shared information. Our findings shed light on why some firm insiders prefer to trade against informed outsiders while others prefer to drive informed outsiders out of trading through voluntary disclosure.

Keywords: shared information; voluntary disclosure; heterogeneous beliefs

JEL Classification: D8; G1; G2

Suggested Citation

Liu, xia and Liu, Shancun and Lu, Lei and Shi, Yongdong and Xiong, Xiong, Voluntary Information Disclosure with Heterogeneous Beliefs (March 29, 2020). Available at SSRN: https://ssrn.com/abstract=3379412 or http://dx.doi.org/10.2139/ssrn.3379412

Xia Liu

affiliation not provided to SSRN

Shancun Liu

Beihang University (BUAA) - School of Economic and Management Science

37 Xue Yuan Road
Beijing 100083
China

Lei Lu (Contact Author)

Asper School of Business, University of Manitoba ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
Canada

Yongdong Shi

Dongbei University of Finance and Economics (DUFE) ( email )

School of Finance
Dalian 116025
China
+86-411-4712805 (Phone)
+86-411-4710432 (Fax)

Xiong Xiong

Tianjin University

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

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