Credibility of Voluntary Disclosure

I examine the credibility of a manager's disclosure of privately observed nonverifiable information to an investor in a repeated cheap-talk game setting. In the single-period game no communication occurs. In the repeated game, however, the manager almost always truthfully reveals his private information provided the manager is sufficiently patient, the accounting report is sufficiently useful for assessing the truthfulness of the manager's voluntary disclosure, and the manager's disclosure performance is evaluated over a sufficiently long period. These factors may explain a manager's propensity to release private information to investors.

[1]  S. Morris.  An Instrumental Theory of Political Correctness , 1998 .

[2]  Jeong‐Yoo Kim.  Cheap Talk and Reputation in Repeated Pretrial Negotiation , 1996 .

[3]  Andrew J. Pincus.  The Reform Act: What CPAs Should Know , 1996 .

[4]  Ariel Rubinstein,et al.  A Course in Game Theory , 1995 .

[5]  Joseph Farrell.  Meaning and Credibility in Cheap-Talk Games , 1993 .

[6]  Guy Laroque,et al.  Using Privileged Information to Manipulate Markets: Insiders, Gurus, and Credibility , 1992 .

[7]  Grace Pownall,et al.  Voluntary Disclosure Credibility And Securities Prices - Evidence From Management Earnings Forecasts, 1969-73 , 1989 .

[8]  J. Sobel.  A Theory of Credibility , 1985 .

[9]  R. Radner.  Repeated Principal-Agent Games with Discounting , 1985 .

[10]  Paul R. Milgrom,et al.  Relying on the Information of Interested Parties , 1985 .

[11]  J. Sobel,et al.  STRATEGIC INFORMATION TRANSMISSION , 1982 .

[12]  Francis A. Lees.  Public disclosure of corporate earnings forecasts , 1981 .

[13]  Teye Marra.  The influence of proprietary disclosure costs on the decision to go public , 2001 .

[14]  Christine Botosan.  Disclosure level and the cost of equity capital , 1997 .

[15]  R. Radner,et al.  An Example of a Repeated Partnership Game with Discounting and with Uniformly Inefficient Equilibria , 1986 .

[16]  Ronald A. Dye,et al.  Proprietary and Nonproprietary Disclosures , 1986 .

[17]  Robert B. Wilson,et al.  Game-theoretic models of bargaining: Reputations in games and markets , 1985 .

[18]  Paul Milgrom.  Good News and Bad News: Representation Theorems and Applications , 1981 .

[19]  Merton H. Miller.  The Cost of Capital, Corporation Finance and the Theory of Investment , 1958 .

[20]  D. Fudenberg,et al.  Digitized by the Internet Archive in 2011 with Funding from Working Paper Department of Economics the Folk Theorem with Imperfect Public Information , 2022 .