Disclosing a Random Walk

43 Pages Posted: 9 Feb 2022 Last revised: 4 Apr 2023

See all articles by Ilan Kremer

Ilan Kremer

University of Warwick; Hebrew University of Jerusalem

Amnon Schreiber

Hebrew University of Jerusalem; Bar-Ilan University - Department of Economics

Andrzej Skrzypacz

Stanford University - Stanford Graduate School of Business

Date Written: March 14, 2023

Abstract

We examine a dynamic disclosure model in which the value of a firm follows a random walk. Every period, with some probability, the manager learns the value and decides whether to disclose it. The manager maximizes the market perception of the firm's value, which is based on disclosed information. In equilibrium, the manager follows a threshold strategy with thresholds below current prices. He sometimes reveals pessimistic information that reduces the market perception of the firm's value. He does so to reduce future market's uncertainty, which is valuable even under risk neutrality.

Keywords: Strategic Disclosure

JEL Classification: D21, D82, D83, G12, L11

Suggested Citation

Kremer, Ilan and Kremer, Ilan and Schreiber, Amnon and Skrzypacz, Andrzej, Disclosing a Random Walk (March 14, 2023). Available at SSRN: https://ssrn.com/abstract=4025592 or http://dx.doi.org/10.2139/ssrn.4025592

Ilan Kremer

Hebrew University of Jerusalem ( email )

20 Lila Street
Re'ut
Jerusalem
Israel

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

Amnon Schreiber

Hebrew University of Jerusalem ( email )

Mount Scopus
Jerusalem, Jerusalem 91905
Israel

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel

Andrzej Skrzypacz (Contact Author)

Stanford University - Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-736-0987 (Phone)
650-725-9932 (Fax)

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