Disclosure and Exchange of Inside Information*

Abstract

AbstractThis paper investigates how cooperation of stock analysts can affect voluntary disclosures of corporate inside information. Previous studies show that corporate insiders have incentives to disclose the information commonly shared by stock analysts, taking stock analysts’ actions as given. We focus on the strategic interactions between corporate insiders and stock analysts, and between stock analysts themselves. We show that voluntary disclosures may occur only when stock analysts intend to share their specialized information. In some sense managers are “forced” to disclose information because if they do not, stock analysts’ information sharing would put them at a disadvantage. Our results highlight the role of information exchange between stock analysts in stimulating voluntary disclosures, and provide an alternative explanation of managers’ motives for voluntary disclosures.