The Interpretation of Information and Corporate Disclosure Strategies |
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Authors: | Dutta Sunil Trueman Brett |
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Institution: | (1) Faculty of Management, Tel Aviv University, 69978 Tel Aviv, Israel;(2) Graduate School of Business, Columbia University, Uris Hall, 3022 Broadway, Room 101, New York, NY 10027-6902, USA |
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Abstract: | This paper analyzes a setting in which a firm's manager can credibly disclose facts, but not their valuation implications. Consequently, he is uncertain as to how those disclosed facts will be interpreted by investors. Introducing such uncertainty affects the manager's disclosure strategy in two important ways. First, it becomes a function of the market's prior valuation of the firm since that valuation provides a clue as to how future disclosures are likely to be interpreted by investors. Second, the disclosure strategy is no longer characterized, in general, by a single good news/bad news partition of the manager's private information. |
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Keywords: | voluntary disclosure information interpretation analyst forecast |
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