Information quality and correlated signals

Article Abstract:

Optimal disclosure policy when two signals are available to be disclosed but the manager is constrained to disclose, at most, one of two estimates about the value of the firm's net assets is investigated. Findings reveal that the market price incorporates the disclosed estimate but likewise adjusts the share price depending on the news contained in the second undisclosed estimate, when the manager follows a policy of reporting either the greater or lower of the two estimates. In particular, share price is adjusted downwards to reflect bad news in the undisclosed estimate, or is adjusted upwards if the news embodied in the undisclosed estimate is good. The unique optimal disclosure policy when both signals are observed but only one is disclosed, and when both may be disclosed, is examined. In case of the latter, the extra cost of disclosing the second signal guarantees that a second signal will be disclosed for some realizations.

Research, Disclosure (Securities law), Assets (Accounting)

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Carrot or sticks? Contract frame and use of decision-influencing information in a principal-agent setting

Article Abstract:

The effect of framing the pay parameter associated with an imperfect state signal as a bonus rather than as a penalty in a principal-agent setting is examined. The results show that an employment contract with a bonus rather than penalty frame, other things equal, facilitates the use of decision-influencing information in a responsibility accounting system because of worker loss aversion.

Bonus & Merit Payments, Analysis, Labor contracts, Bonuses, Labour contracts

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Acquisition and discretionary disclosure of private information and its implications for firms' productive activities

Article Abstract:

The author discusses the economic implications of disclosing corporate financial information. The article presents a model for the economic costs tied to acquisition and discretionary disclosure.

Statistical Data Included, Models, Management, Economic aspects, Financial management, Financial statements, Corporation reports, Company reports, Disclosure statements (Accounting)

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