On the Voluntary Disclosure of Redundant Information
47 Pages Posted: 11 Oct 2021 Last revised: 8 Nov 2022
Date Written: August 24, 2021
Abstract
Why do firms engage in costly, voluntary disclosure of information which is subsumed by a later announcement? We consider a model in which the firm's manager can choose to disclose short-term information which becomes redundant later. When disclosure costs are sufficiently low, the manager discloses even if she only cares about the long-term price of the firm. Intuitively, by disclosing, she causes early investors to trade less aggressively, reducing price informativeness, which in turn increases information acquisition by late investors. The subsequent increase in acquisition more than offsets the initial decrease in price informativeness and, consequently, improves long term prices.
Keywords: costly voluntary disclosure, information acquisition, redundant information
JEL Classification: D21, D82, D83, D84, G14, G32
Suggested Citation: Suggested Citation