Abstract
In this paper, we model a corporate insider's motivation of truthful pre-trade disclosure of her private payoff-relevant information. In a model in which disclosure has no efficiency gains like reduced cost of capital, no legal implications, and no signaling motivations, we show that a corporate insider may choose to disclose payoff-relevant information as a means of maximizing her trading profits. This truthful disclosure is done pre-trade and is beneficial to the corporate insider as it erodes the informational advantage of other traders with private information. This new rationale for public disclosure needs to be empirically tested by examining the trades of corporate insiders after, and not before, public disclosures.
Published Version
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