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The Effect of Voluntary Disclosure on Investment Inefficiency

时间:2018-10-08

Accounting Seminar(2018-18)

Topic:The Effect of Voluntary Disclosure on Investment Inefficiency

Speaker: Xiaojing Meng,NYU Stern School of Business

Time: Wednesday, Oct. 10th, 10:00-11:30a.m

Place: Room K02, Guanghua Building 2

 

Abstract:

Firms’ability to voluntarily disclose or conceal information may affect their investment decisions. In particular, voluntary disclosure in the presence of uncertainty about information endowment (a la Dye 1985) inducesfirms to choose the riskier among projects with equal expected return (Ben-Porath et al 2017). We study multi-stage investment decisions in which the firm's managerfirst chooses between projects with different riskiness and later may privatelylearn additional information about the technology of the chosen project. If informed, the firmcan voluntarily disclose the new information to the market. Finally, based on the availableinformation the manager determines the scale of the investment. If uninformed, the managercannot tailor the investment scale to the realized technology and hence incurs a cost of ignorance. This cost of ignorance is higher for the riskier project, leading to a lower expected cashflow. We study how a manager, who cares about both thefirm’s stock price following the disclosure stage (myopic incentive) and the long-term cashflow, optimally chooses the project andthe voluntary disclosure decision, and how the investment efficiency varies with managerial my-opia and information environment. As expected, managerial myopia always (weakly) decreasesoverall investment efficiency. However, information environment (the probability of obtaininginformation) has a non-monotone effect on overall investment efficiency.

 

Introduction:

xmeng

Xiaojing Meng is an associate professor at New York University Stern School of Business. She joined NYU Stern School of Business as an Assistant Professor of Accounting in July 2011.

Professor Meng's research interests include financial reporting, corporate governance and debt covenants. She is particularly interested in how different parties strategically communicate their information, and how accounting information is used in firms' and investors' decision-making processes. Her current work examines how analysts' reputational concerns affect their incentives to acquire information.

Professor Meng received a B.A. in Economics from the Central University of Finance and Economics, and an M.A. in Accounting from Beijing University. She expects to receive a Ph.D. in Accounting from Columbia Business School.

http://www.stern.nyu.edu/faculty/bio/xiaojing-meng

Your participation is warmly welcomed!

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