Insider Horizon and Disclosure Policies

63 Pages Posted: 22 May 2018 Last revised: 9 Aug 2021

See all articles by Brian D. Cadman

Brian D. Cadman

University of Utah - David Eccles School of Business

Mirko Stanislav Heinle

University of Pennsylvania - Accounting Department

Daniele Macciocchi

University of Miami Herbert Business School

Date Written: May 8, 2018

Abstract

We investigate the relation between insider horizon and disclosure policy. First, we develop and analyze a rational expectations model where insiders commit to a disclosure policy. Counter to casual intuition, insiders with a short-horizon prefer more disclosure and are willing to bear costs of disclosure to reduce information asymmetries among capital market participants. We then empirically test our predictions in the setting of newly public firms and firms where the CEO is approaching retirement. We find that firms with insiders that have a shorter horizon disclose more and experience lower information asymmetry. Our study contributes to the understanding of firms' disclosure choices by suggesting that the horizon of insiders shapes a firm's disclosure policy.

Keywords: Investment Horizon, Voluntary Disclosure, Disclosure Policy, IPO

JEL Classification: M40, G14, G24, G32, D83

Suggested Citation

Cadman, Brian D. and Heinle, Mirko Stanislav and Macciocchi, Daniele, Insider Horizon and Disclosure Policies (May 8, 2018). Available at SSRN: https://ssrn.com/abstract=3175477 or http://dx.doi.org/10.2139/ssrn.3175477

Brian D. Cadman

University of Utah - David Eccles School of Business ( email )

1645 Campus Center Drive
Salt Lake City, UT 84112
United States
801-585-9517 (Phone)

HOME PAGE: http://www.business.utah.edu/bio/briancadman

Mirko Stanislav Heinle (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Daniele Macciocchi

University of Miami Herbert Business School ( email )

P.O. Box 248126
Florida
Coral Gables, FL 33124
United States

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