Abstract

We develop a model in which information about a rm’s value can be obtained from two sources: (i) voluntary disclosure by a rm’s manager, if she is informed, and (ii) an exogenous source – news – with uncertain accuracy, i.e., who may be real or fake. We focus on the case where the accuracy of the news is positively correlated with the manager’s information endowment, and the manager makes the disclosure decision without knowing the news. In contrast to the existing theoretical literature, our model does not admit a pure-strategy disclosure equilibrium. Instead, the equilibrium is characterized by two thresholds: an informed manager never discloses values below the lower threshold, always discloses values above the higher threshold, and employs a mixed strategy with a monotonically increasing probability of disclosure for values between the two thresholds. We show that the presence of news crowds out managerial disclosure.