Disagreements among Shareholders over a Firm's Disclosure Policy



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    • Anderson Graduate School of Management, University of California, Los Angeles. I gratefully acknowledge the comments of Kirsten Ely, Michael Firth, Bruce Miller, Joshua Ronen, and Robert E. Verrecchia. I also thank the editor, Stephen A. Buser, and two anonymous referees for many valuable suggestions.


This paper examines the issue of voluntary disclosure of information by firms with heterogeneous shareholders. It shows that in a rational expectations setting, better informed shareholders prefer less disclosure than less well-informed shareholders. This is due to differences in the adverse risk-sharing effect and the beneficial cost-saving effect of disclosure among shareholders with different risk tolerances and information acquisition cost functions. The presence of individual liquidity shocks is shown to reduce shareholder disagreements regarding a firm's disclosure policy.