Information Disclosure in Speculative Markets
20 Pages Posted: 4 Nov 2004
Date Written: June 2006
When investors hold different opinions about the value of an asset, prices can diverge from fundamental values and incorporate a speculative component. This paper analyzes the effect of such a speculative environment on managerial incentives to voluntarily disclose information about the value of the firm. I show that differences of opinion, when they induce a speculative premium, increase the threshold for information disclosure thereby reducing the likelihood that voluntary disclosure of information occurs. The model generates testable empirical implications about the propensity to issue management earnings forecasts.
Keywords: Voluntary disclosure, difference of opinions, speculative premium
JEL Classification: D49, D84, G12, G30, M40
Suggested Citation: Suggested Citation