Investor sophistication and voluntary disclosures

Ronald A. Dye*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

55 Scopus citations


This paper studies voluntary disclosures in a model in which investors probabilistically become informed about whether a firm has received information. The firm's value is established via a first price, sealed bid, common value auction. The paper demonstrates that the threshold level determining whether the firm withholds or discloses information uniformly declines in the probability investors are informed. The paper also shows that, notwithstanding the risk-neutrality of investors, the expected selling price of the firm strictly decreases (increases) in the probability individual investors are informed when that probability is small (large). These results follow from "winner's curse" effects.

Original languageEnglish (US)
Pages (from-to)261-287
Number of pages27
JournalReview of Accounting Studies
Issue number3
StatePublished - 1998

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)


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