Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57507
Authors: 
Dang, Tri Vi
Hakenes, Hendrik
Year of Publication: 
2010
Series/Report no.: 
Preprints of the Max Planck Institute for Research on Collective Goods 2010,36
Abstract: 
Disclosure of information triggers immediate price movements, but it mitigates price movements at a later date, when the information would otherwise have become public. Consequently, disclosure shifts risk from later cohorts of investors to earlier cohorts. Hence, disclosure policy can be interpreted as a tool to control interim asset price movements, and to allocate risk intertemporally. This paper shows that a policy of partial disclosure (and, hence, of intertemporal risk sharing) can maximize, but surprisingly also minimize, the market value of the firm. Our model also applies to a setting where a central bank chooses the quality and frequency of the disclosure of macroeconomic information, or to the precision of disclosure by (distressed) banks.
Subjects: 
financial reporting
disclosure
information policy
asset pricing
intertemporal risk sharing
general equilibrium
JEL: 
G14
D92
M41
Document Type: 
Working Paper

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