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Voluntary information disclosure with heterogeneous beliefs

Author

Listed:
  • Liu, Xia
  • Liu, Shanchun
  • Lu, Lei
  • Shi, Yongdong
  • Xiong, Xiong

Abstract

We present a model in which an insider (i.e., manager or CEO) and an informed outsider (i.e., financial analyst or professional) have heterogeneous beliefs on their shared information about a risky asset and analyze the insider's incentive to voluntarily disclose this information to the public. We find that with heterogeneous beliefs the insider and informed outsider exploit their shared information differently and this might give rise to the insider's voluntary disclosure of this shared information to the public to seek excess profits. Specifically, the insider is more likely to release the information to the public when she has a greater relative information advantage than the informed outsider and that the informed outsider is more optimistic in the shared information. Our findings shed light on why some firm insiders prefer to trade against informed outsiders while others prefer to drive informed outsiders out of trading through voluntary disclosure.

Suggested Citation

  • Liu, Xia & Liu, Shanchun & Lu, Lei & Shi, Yongdong & Xiong, Xiong, 2021. "Voluntary information disclosure with heterogeneous beliefs," Journal of Economic Dynamics and Control, Elsevier, vol. 124(C).
    • Handle: RePEc:eee:dyncon:v:124:y:2021:i:c:s0165188921000166
    DOI: 10.1016/j.jedc.2021.104081
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    Citations

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    Cited by:

    1. Han, Jinhui & Li, Xiaolong & Ma, Guiyuan & Kennedy, Adrian Patrick, 2023. "Strategic trading with information acquisition and long-memory stochastic liquidity," European Journal of Operational Research, Elsevier, vol. 308(1), pages 480-495.

    More about this item

    Keywords

    Heterogeneous beliefs; Shared information; Voluntary disclosure;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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