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Equilibrium voluntary disclosures, asset pricing, and information transfers

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  • Dye, Ronald A.
  • Hughes, John S.

Abstract

We study a firm’s manager’s voluntary disclosure decisions and those disclosure decisions’ asset pricing, cost of capital, and information transfer effects in a model where investors trade multiple securities. We: develop new asset pricing formulas when the manager makes no disclosure that impose testable cross-equation restrictions on firms’ market values; develop a wide array of comparative statics; obtain surprising findings about nondisclosure’s effects on investors’ perceptions of uncertainty about firms’ future cash flows; develop simple, interpretable expressions for firms’ cost of capital; and show how no disclosure by one firm generates informational externalities on other firms.

Suggested Citation

  • Dye, Ronald A. & Hughes, John S., 2018. "Equilibrium voluntary disclosures, asset pricing, and information transfers," Journal of Accounting and Economics, Elsevier, vol. 66(1), pages 1-24.
    • Handle: RePEc:eee:jaecon:v:66:y:2018:i:1:p:1-24
    DOI: 10.1016/j.jacceco.2017.11.003
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    References listed on IDEAS

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    Cited by:

    1. Zheng, Zhen & Lin, Yongjia & Yu, Xiaoou & Liu, Xinming, 2021. "Product market competition and the cost of equity capital," Journal of Business Research, Elsevier, vol. 132(C), pages 1-9.
    2. Marcelo Ortiz, 2020. "Financial disclosure environment and the cash policy of private firms," Economics Working Papers 1692, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Bertomeu, Jeremy, 2024. "Disclosure paternalism," Journal of Accounting and Economics, Elsevier, vol. 77(2).
    4. Xie, Heng & Cui, Xieyuan & Cao, Nannan & Guo, Zhouqi & Zhang, Qianchuan, 2024. "Social trust and the cost of equity," Finance Research Letters, Elsevier, vol. 63(C).
    5. Anil Arya & Ram N. V. Ramanan, 2023. "Endogenizing Discretion in Disclosures," Management Science, INFORMS, vol. 69(6), pages 3730-3747, June.
    6. Henry L. Friedman & John S. Hughes & Beatrice Michaeli, 2022. "A Rationale for Imperfect Reporting Standards," Management Science, INFORMS, vol. 68(3), pages 2028-2046, March.
    7. Banerjee, Snehal & Breon-Drish, Bradyn & Kaniel, Ron & Kremer, Ilan, 2023. "On the voluntary disclosure of redundant information," Journal of Economic Theory, Elsevier, vol. 214(C).
    8. Marcelo Ortiz, 2020. "Financial Disclosure Environment and the Cash Policy of Private Firms," Working Papers 1148, Barcelona School of Economics.
    9. Hao, Jinji, 2024. "Disclosure regulation, cost of capital, and firm values," Journal of Accounting and Economics, Elsevier, vol. 77(1).
    10. Arya, Anil & Ramanan, Ram N.V., 2024. "Long-term firm gains from short-term managerial focus: Myopia and voluntary disclosures," Journal of Accounting and Economics, Elsevier, vol. 77(2).
    11. Figlioli, Bruno & Lemes, Sirlei & Lima, Fabiano Guasti, 2020. "In search for good news: The relationship between accounting information, bounded rationality and hard-to-value stocks," Emerging Markets Review, Elsevier, vol. 44(C).
    12. Gong, Yaxian, 2019. "Information quality choice and information disclosure in oligopoly," Research in Economics, Elsevier, vol. 73(3), pages 216-224.

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