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Corporate strategy and information disclosure
Author(s) -
Ferreira Daniel,
Rezende Marcelo
Publication year - 2007
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2007.tb00050.x
Subject(s) - business , incentive , private information retrieval , voluntary disclosure , face (sociological concept) , marketing , accounting , microeconomics , economics , social science , statistics , mathematics , sociology
We examine voluntary disclosures of information about corporate strategies. We develop a model in which managers choose whether to reveal their strategic plans only to some partners of the firm or also to the outside world. We show that managers face a tradeoff when deciding whether to disclose their private information to outsiders. On the one hand, by disclosing their intentions, managers become reluctant to change their minds in the future. This may lead them to make inefficient project implementation decisions. On the other hand, information disclosure about corporate strategy provides strong incentives for partners of the firm to undertake strategy‐specific investments.