Shareholder Monitoring and Discretionary Disclosure

58 Pages Posted: 11 Jan 2021 Last revised: 10 Mar 2021

See all articles by Venky Nagar

Venky Nagar

University of Michigan, Stephen M. Ross School of Business

Jordan Schoenfeld

Dartmouth College - Tuck School of Business

Date Written: January 25, 2021

Abstract

Theories of delegated monitoring predict that when public disclosure is costly, monitoring by a large investor leads management to supply more private information to that investor, and less public disclosure to other similarly aligned investors who free-ride off the monitor. We test this prediction in the setting where large shareholders contractually bind management to share private information. We find that after the execution of such contracts, firms improve their performance and reduce their public disclosures. Overall, our evidence supports the disclosure prediction of delegated monitoring theories, and is inconsistent with poor-performance and expropriation theories of disclosure.

Keywords: Corporate Disclosure, Liquidity, Governance, Shareholder Contracts

JEL Classification: G30, K22, L14, M40

Suggested Citation

Nagar, Venky and Schoenfeld, Jordan, Shareholder Monitoring and Discretionary Disclosure (January 25, 2021). Available at SSRN: https://ssrn.com/abstract=3731180 or http://dx.doi.org/10.2139/ssrn.3731180

Venky Nagar

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-647-3292 (Phone)
734-764-3146 (Fax)

Jordan Schoenfeld (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

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