Endogenizing Discretion in Disclosures

Management Science, Forthcoming

45 Pages Posted: 5 Oct 2021 Last revised: 25 Jul 2022

See all articles by Anil Arya

Anil Arya

Ohio State University (OSU) - Fisher College of Business

Ram Ramanan

SUNY at Binghamton - School of Management; Indian School of Business

Date Written: June 15, 2022


A firm’s publicly available information reflects ex ante committed information releases and ex post discretionary disclosures. In a setting wherein a firm’s CEO is concerned with stock market valuation and confrontations with the employee union, this paper endogenizes when she retains ex post disclosure discretion and when she curtails her discretion, opting instead to ex ante committing to not gathering information or publicly disclosing information. The underlying economic forces entail a tradeoff between the time-inconsistency problem (the CEO’s ex post preferences can diverge from her ex ante goals) and how silence (absence of information) under the ex ante and ex post paths is valued differentially by the union. In effect, silence under different systems “speaks” differently, and this influences both the labor union’s incentives to engage in bargaining with the firm and the stock market’s pricing of the firm’s equity.

Keywords: Commitment, Discretionary disclosures, Information system design, Labor union

Suggested Citation

Arya, Anil and Ramanan, Ram, Endogenizing Discretion in Disclosures (June 15, 2022). Management Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3935991 or http://dx.doi.org/10.2139/ssrn.3935991

Anil Arya

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Ram Ramanan (Contact Author)

SUNY at Binghamton - School of Management ( email )

P.O. Box 6015
Binghamton, NY 13902-6015
United States

Indian School of Business ( email )

Hyderabad, 500032

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