On the Voluntary Disclosure of Redundant Information

Why do firms engage in costly, voluntary disclosure of informationwhich is subsumed by a later announcement? We consider a model inwhich the firm's manager can choose to disclose short-term informationwhich becomes redundant later. When disclosure costs are sufficientlylow, the manager discloses even if she only cares about the long-termprice of the firm. Intuitively, by disclosing, she causes early investorsto trade less aggressively, reducing price informativeness, whichin turn increases information acquisition by late investors. The subsequentincrease in acquisition more than offsets the initial decrease inprice informativeness and, consequently, improves long term prices