On the Voluntary Disclosure of Redundant Information

Abstract

Why do firms engage in costly, voluntary disclosure of information which is eventually subsumed by a later announcement? We consider a model in which the firm’s manager can choose to disclose short-term information which becomes redundant later. When disclosure costs are sufficiently low, we show the manager discloses such information even if she only cares about the long-term price of the firm. Intuitively, by doing so, she decreases information acquisition by early investors but increases acquisition by late investors. We show that the subsequent increase in acquisition more than offsets the initial decrease and, consequently, improves long term prices.