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Corporate Disclosures: Strategic Donation of Information

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  • JHINYOUNG SHIN
  • RAJDEEP SINGH

Abstract

In this paper, we model a corporate insider's motivation of truthful pre‐trade disclosure of her private payoff‐relevant information. In a model in which disclosure has no efficiency gains like reduced cost of capital, no legal implications, and no signaling motivations, we show that a corporate insider may choose to disclose payoff‐relevant information as a means of maximizing her trading profits. This truthful disclosure is done pre‐trade and is beneficial to the corporate insider as it erodes the informational advantage of other traders with private information. This new rationale for public disclosure needs to be empirically tested by examining the trades of corporate insiders after, and not before, public disclosures.

Suggested Citation

  • Jhinyoung Shin & Rajdeep Singh, 2010. "Corporate Disclosures: Strategic Donation of Information," International Review of Finance, International Review of Finance Ltd., vol. 10(3), pages 313-337, September.
    • Handle: RePEc:bla:irvfin:v:10:y:2010:i:3:p:313-337
    DOI: 10.1111/j.1468-2443.2010.01120.x
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    References listed on IDEAS

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    Cited by:

    1. Grégoire, Philippe & Huang, Hui, 2012. "Information disclosure with leakages," Economic Modelling, Elsevier, vol. 29(5), pages 2005-2010.
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    3. Li, Ningwei & Li, Zhihua & Liu, Hong & Yang, Qingshan, 2024. "Strategic information leakage with market supervision," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    4. Liu, Xia & Huang, Wenli & Liu, Bo & Zhang, Xiaohong, 2019. "Strategic leakage of private information," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 637-644.

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