Optimists, Pessimists, and Managerial Disclosures

46 Pages Posted: 28 Apr 1997

See all articles by Sunil Dutta

Sunil Dutta

University of California, Berkeley - Haas School of Business

Brett Trueman

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

Date Written: March 1997

Abstract

The objective of this paper is to explore the effects of analyst bias on the voluntary disclosure decisions of corporate managers. It is shown that when a manager believes that an analyst following his firm might be exhibiting undue optimism, he will grant the analyst access to his private information not only if it is favorable, but, potentially, also if it is sufficiently unfavorable. In contrast, when the manager believes that the analyst may be exhibiting undue pessimism, he will withhold access not only when the information is unfavorable, but, possibly, also when it is sufficiently favorable. These strategies differ not only from each other, but also from the optimal strategy in a setting without analyst bias. These differences make clear that any analysis of managerial disclosure strategies must take into account the possible biases of analysts and, by extension, the nature of the information currently in the possession of investors in the marketplace. The analysis also explores the effect of changes in the economy's parameters on the probability of managerial disclosure. Some of these results again differ from those obtained in a setting without analyst bias and have the potential of generating future empirical work.

JEL Classification: G29, D82, G14, M41

Suggested Citation

Dutta, Sunil and Trueman, Brett, Optimists, Pessimists, and Managerial Disclosures (March 1997). Available at SSRN: https://ssrn.com/abstract=35968 or http://dx.doi.org/10.2139/ssrn.35968

Sunil Dutta (Contact Author)

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

545 Student Services Building, #1900
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Berkeley, CA 94720
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510-643-1229 (Phone)
510-643-1412 (Fax)

Brett Trueman

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

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
310-825-4720 (Phone)
310-267-2193 (Fax)

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