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Informational correlation and selective disclosure

Author

Listed:
  • Qiang Gong

    (Zhongnan University of Economics and Law)

  • Jie Shuai

    (Zhongnan University of Economics and Law)

  • Huanxing Yang

    (Ohio State University)

Abstract

We study a voluntary disclosure game in which a firm manager may learn private information about multiple aspects and can selectively disclose any subset of that information. A distinctive feature of our model is informational correlation: whether the manager is informed about one aspect is correlated with whether he is informed about the other aspect. We find that higher positive informational correlation makes partial disclosure less likely and reduces the firm’s perceived value under partial disclosure, whereas higher negative informational correlation leads to opposite effects. We also examine the implications of our results on stock prices.

Suggested Citation

  • Qiang Gong & Jie Shuai & Huanxing Yang, 2023. "Informational correlation and selective disclosure," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(2), pages 645-683, August.
    • Handle: RePEc:spr:joecth:v:76:y:2023:i:2:d:10.1007_s00199-022-01473-x
    DOI: 10.1007/s00199-022-01473-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Asymmetric information; Voluntary disclosure; Stock prices; Multiple aspects; Informational correlation;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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