Voluntary Disclosure, Shareholder Communication and Intervention
Dr. Xue Jia
Senior Lecturer in Accounting
Faculty of Business and Economics
The University of Melbourne
This paper analyses how a manager’s voluntary disclosure strategy affects an activist shareholder’s strategic choice between communication with firm management and direct intervention. The manager chooses to withhold information when it can induce more communication from the shareholder. We find that depending on the value of the intervention cost and the probability of intervention after communication, the manager can choose to never disclose his private information, only disclose good news withhold bad news or always disclose his private information to the shareholder. The full nondisclosure equilibrium and the partial disclosure equilibrium are sustained in our setting in the absence of any direct disclosure frictions.