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Author: Michael Kirschenheiter Publisher: ISBN: Category : Languages : en Pages : 48
Book Description
We develop the first general equilibrium exchange economy with risk-averse investors where firm managers can voluntarily make costly, discretionary disclosures regarding the liquidating value of the firm. This extends the discretionary disclosure setting of Verrecchia (1983) by relaxing the assumption of mean-variance pricing. Instead, we derive the equilibrium prices when risk-averse investors optimally allocate funds between a risk-free bond and risky stocks. We establish that these prices are equivalent to prices that would prevail if investors were risk neutral using risk-adjusted variables. The intuition for the required change in probability measure is analogous to the intuition for the adjustments required for option pricing. We show that in this setting, managers' optimal discretionary disclosure strategy is characterized by a disclosure threshold. We provide comparative static results for changing costs, signal variances, and asset variances. Further, we show that the structure of the prices and strategies derived is robust to the introduction of correlation in the future firm values.probability measure.
Author: Michael Kirschenheiter Publisher: ISBN: Category : Languages : en Pages : 48
Book Description
We develop the first general equilibrium exchange economy with risk-averse investors where firm managers can voluntarily make costly, discretionary disclosures regarding the liquidating value of the firm. This extends the discretionary disclosure setting of Verrecchia (1983) by relaxing the assumption of mean-variance pricing. Instead, we derive the equilibrium prices when risk-averse investors optimally allocate funds between a risk-free bond and risky stocks. We establish that these prices are equivalent to prices that would prevail if investors were risk neutral using risk-adjusted variables. The intuition for the required change in probability measure is analogous to the intuition for the adjustments required for option pricing. We show that in this setting, managers' optimal discretionary disclosure strategy is characterized by a disclosure threshold. We provide comparative static results for changing costs, signal variances, and asset variances. Further, we show that the structure of the prices and strategies derived is robust to the introduction of correlation in the future firm values.probability measure.
Author: Bjorn Jorgensen Publisher: ISBN: Category : Languages : en Pages :
Book Description
We model managers' equilibrium strategies for voluntarily disclosing information about their firm's risk. We consider a multi-firm setting in which the variance of each firm's future cash flow is uncertain. A manager can disclose, at a cost, this variance before offering the firm for sale in a competitive stock market with risk-averse investors. In our partial disclosure equilibrium, managers voluntarily disclose if their firm has a low variance of future cash flows, but withhold the information if their firm has highly variable future cash flows. We establish how the manager's discretionary risk disclosure affects the firm's share price, expected stock returns, and beta, within the framework of the Capital Asset Pricing Model. We show that whereas one manager's discretionary disclosure of his firm's risk does not affect other firms' share prices, it does affect the other firms' betas. Also, we demonstrate that a disclosing firm has lower risk premium and beta ex-post than a non-disclosing firm. Finally, we show that ex-ante, the expected risk premium and expected beta of each firm are higher under a mandatory risk disclosure regime than in the partial disclosure equilibrium that arises under a voluntary disclosure regime.
Author: Bjorn Jorgensen Publisher: ISBN: Category : Languages : en Pages : 24
Book Description
Verrecchia (1983) investigates a manager's incentives for costly, discretionary disclosure of his information to risk-averse traders when the functional form of prices is exogenously specified. We extend Verrecchia (1983) by deriving the endogenously determined functional form of prices that would arise when all traders have constant risk tolerance. We show that these endogenously determined prices are inconsistent with the assumed prices in Verrecchia (1983) when the manager elects to not disclose. We derive the manager's disclosure strategy for our setting and extend the comparative static results in Verrecchia (1990) for risk-neutral traders to a setting where traders have constant risk tolerance and prices are endogenously derived. Further, in our setting, discretionary disclosure does not affect how traders price risk of different outcomes. Also, we offer a representation of risk-averse traders' prices using risk-adjusted distributions. Finally, these results provide implications for empirical-archival discretionary disclosure studies.
Author: Nicholas L. Georgakopoulos Publisher: Cambridge University Press ISBN: 1108146171 Category : Law Languages : en Pages : 215
Book Description
This book opens with a simple introduction to financial markets, attempting to understand the action and the players of Wall Street by comparing them to the action and the players of main street. Firstly, it explores the definition of a security by its function, the departure from the buyer beware environment of corporate law and the entrance into the seller disclose environment of securities law. Secondly, it shows that the cost of disclosure rules is justified by their capacity to combat irrationalities, fads, and panics. The third section explains how the structure of class actions is designed to improve deterrence. Next it explores the economic harm from insider trading and how the law fights it. In sum, the book shows how all these parts of securities law serve the virtuous cycle from liquidity to accurate prices and more trading and how the great recession showed that our securities regulation reacted mostly adequately to the crisis.
Author: Harri J. Seppänen Publisher: ISBN: Category : Corporations Languages : en Pages : 214
Book Description
Based on an analysis of disclosure data from 42 non-financial Finnish firms between 1990 and 1992, examines managers' information disclosure practices (disclosure frequency and timing). Investigates whether external financing arrangements are associated with managers' general accounting disclosure practices in an institutional setting that is considered to exhibit 'relationship' financing.
Author: American Bar Association. House of Delegates Publisher: American Bar Association ISBN: 9781590318737 Category : Law Languages : en Pages : 216
Book Description
The Model Rules of Professional Conduct provides an up-to-date resource for information on legal ethics. Federal, state and local courts in all jurisdictions look to the Rules for guidance in solving lawyer malpractice cases, disciplinary actions, disqualification issues, sanctions questions and much more. In this volume, black-letter Rules of Professional Conduct are followed by numbered Comments that explain each Rule's purpose and provide suggestions for its practical application. The Rules will help you identify proper conduct in a variety of given situations, review those instances where discretionary action is possible, and define the nature of the relationship between you and your clients, colleagues and the courts.
Author: Michael Kirschenheiter
Author: Michael Kirschenheiter
Author: Bjorn Jorgensen
Author: Bjorn Jorgensen
Author: Nicholas L. Georgakopoulos
Author: Harri J. Seppänen
Author: Peddina Mohana Rao
Author: 
Author: Stijn Claessens
Author: American Bar Association. House of Delegates
Author: