Voluntary disclosures and the trading behavior of corporate insiders

Article Abstract:

Corporate insiders have access to more accurate information about their company's profit potential and can use this knowledge to boost their expected trading profits. They may also play a role in the firm's decision to make voluntary corporate disclosures. A model is developed that investigates the incentives of insiders who trade in their company's stock for themselves in making these disclosures. The results show that disclosure incentives are affected by the nature of the market for the company's stock at any given time. These incentives are determined by the fact that the trading behavior of all traders is altered by a public disclosure such that strategic insiders can boost their trading profits to the detriment of other traders.

Disclosure (Securities law), Insider trading in securities, Insider trading (Securities)

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A model of two-tiered financial reporting

Article Abstract:

A model of a two-tiered financial reporting environment that influences the trading profits of various investor groups is developed. The model shows that the effect of summary reporting on unsophisticated traders is highly dependent on the various characteristics of the reporting environment. In particular, two-tiered reporting is shown to be detrimental to unsophisticated investors in instances where the reduction process removes important value-relevant information or where unsophisticated traders can acquire substantial information from the full report. Such a result can be expressed either through expected trading profits or through the equilibrium number of unsophisticated traders.

Models, Financial statements

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Public disclosure and the structure of private information markets

Article Abstract:

Investor demand for information disclosures is critically determined by the structure of private information markets. Changes in polices of disclosure affect the distribution of private information across traders. Public disclosure becomes disadvantageous to traders in cases of optimal response by a monopolist. In such cases, the monopolist responds to public disclosure through the sale of lower priced, more precise signals. Traders are better off when their firms are empowered to modify the private information market's structure through selective private information disclosures prior to release to the public. The tractability of the model enhances the value of its formulation.

Finance, Investors, Disclosure statements (Accounting), Monopolistic competition

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