The primary role of equity compensation is to provide incentives to an effort-averse agent. Here, we show that the chosen level of equity incentives, when publicly disclosed, will also convey information about future earnings, causing two-way linkages between incentive compensation and financial...

This paper develops a model of financing that jointly determines a firm's capital structure, its voluntary disclosure policy, and its cost of capital. Investors who receive securities in return for supplying capital sometimes incur losses when they trade their securities with an informed trader....

Investors have a finite capacity to organize all information they receive from financial disclosures. In a model of rational inattention, we show that investor attention capacity affects the probability of disclosure. In the model, an informed firm makes a strategic voluntary disclosure subject...