The Informativeness of Disclosures.

• In Event: Strategic Disclosures 2

Abstract

Disclosures have long been regulated to ensure relevant information revelation. Yet,
standard setters acknowledge disclosure regulation frequently fails to ensure the de-
sired informativeness. I show disclosure regulation faces fundamental obstacles. While
we know that disclosures comprise two information channels, I show in a partially-
revealing signaling game there is endogenous interaction between the channels. Due
to this interaction, mandating disclosure may 1) eliminate the most informative equilibrium, and 2) support the least informative equilibrium. Assuming fully informative
signaling assumes away the negative interaction between the channels, thus concealing
fundamental impediments to effective disclosure regulation.

Author

• Tommy Stamland, Norwegian School of Economics