Managerial Disclosures and Shareholder Litigation

Review of Accounting Studies, Vol 2, No 2, 1997

Posted: 8 Oct 1997

See all articles by Brett Trueman

Brett Trueman

University of California, Los Angeles (UCLA) - Anderson School of Management

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Abstract

This paper explores the link between shareholder lawsuits brought under Rule 10b-5 of the Securities Exchange Act of 1934 and managerial disclosures of prospective information. When the manager's information is such that there is no affirmative duty to disclose under Rule 10b-5, previous research has shown that the manager will withhold his information if it is sufficiently unfavorable and will disclose it otherwise. When the manager's information is such that there exists an affirmative duty to disclose under Rule 10b-5, it is shown here that the manager will release either good news or news that is sufficiently bad. Further, the good news disclosures are expected to be more precise than those that reflect unfavorable information. It is also demonstrated that the probability of a disclosure will increase with both the precision of the manager's information and the variability of his firm's earnings.

JEL Classification: M41, M43, D82

Suggested Citation

Trueman, Brett, Managerial Disclosures and Shareholder Litigation. Review of Accounting Studies, Vol 2, No 2, 1997. Available at SSRN: https://ssrn.com/abstract=35958

Brett Trueman (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

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