Voluntary Disclosure and Risk Sharing

J.P.M. Suijs

Research output: Working paperDiscussion paperOther research output

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Abstract

This paper analyzes the disclosure strategy of firms that face uncertainty regarding the investor's response to a voluntary disclosure of the firm's private information.This paper distinguishes itself from the existing disclosure literature in that firms do not use voluntary disclosures to separate themselves from the less profitable firms.Here, voluntary disclosures are used to redistribute risk.It is shown that in a partial disclosure equilibrium, a firm discloses relatively bad news and withholds relatively good news.The reason for nondisclosure is that a firm is not willing to risk a negative response by the investor.However, if private information is relatively bad, nondisclosure imposes such a high risk on the investor, that he invests most of his capital in investment opportunities other than the firm.In that case, the firm is better off by disclosing its private information as this reduces the risk of the investor and increases the expected investment in the firm.
Original languageEnglish
Place of PublicationTilburg
PublisherAccounting
Number of pages27
Volume2001-90
Publication statusPublished - 2001

Publication series

NameCentER Discussion Paper
Volume2001-90

Fingerprint

Voluntary disclosure
Risk sharing
Investors
Disclosure
Private information
News
Investment opportunities
Uncertainty

Keywords

  • risk sharing
  • voluntary disclosure

Cite this

Suijs, J. P. M. (2001). Voluntary Disclosure and Risk Sharing. (CentER Discussion Paper; Vol. 2001-90). Tilburg: Accounting.
Suijs, J.P.M. / Voluntary Disclosure and Risk Sharing. Tilburg : Accounting, 2001. (CentER Discussion Paper).
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Suijs, JPM 2001 'Voluntary Disclosure and Risk Sharing' CentER Discussion Paper, vol. 2001-90, Accounting, Tilburg.

Voluntary Disclosure and Risk Sharing. / Suijs, J.P.M.

Tilburg : Accounting, 2001. (CentER Discussion Paper; Vol. 2001-90).

Research output: Working paperDiscussion paperOther research output

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Suijs JPM. Voluntary Disclosure and Risk Sharing. Tilburg: Accounting. 2001. (CentER Discussion Paper).