Abstract:*

We present a strategic disclosure model in which a manager chooses between a short-term and a long-term project. The short-term cash flow can be disclosed early but can also be temporarily hidden. If the manager chooses the long-term project, there are no results to disclose in the short run. The stock price reflects suspicions that the manager is concealing a negative outcome of the short-term project. Consistent with the existing literature, we find that strategic disclosure may lead to inefficiency, with the manager selecting an inferior short-term project to maximize the short-run price. However, our main result demonstrates that the inefficiency is quite limited, even when the manager cares almost entirely about the short-term stock price.

*Co-authored with I. Guttman (NYU), A. Krzypacz (Stanford University) and E. Wiedman (Hebrew University)

General information:

Attendance to this seminar is possible by invitation only. Please send an e-mail to finsec-abs@uva.nl if your are interested in attending this seminar.