| The purpose of the dissertation is to examine the implications of discretionary disclosure of contractible information by principals and agents on the optimal compensation schedule, disclosure strategy, and social welfare in an agency setting.;In the first chapter an agent is uncertain about what performance-related information has been collected by the principal. It is shown that this uncertainty leads the principal to choose to withhold information that is sufficiently favorable, resulting in a loss of efficiency. The optimal wage schedule in this setting is consistent with observed practices. With respect to efficiency, it is shown that the principal's strategic behavior may lead to inconsistency between the ranking of information systems when information is publicly observed and the ranking when information is privately observed by the principal.;In the second chapter, the principal is uncertain about the performance-related information possessed by the agent. The analysis in this chapter is framed in terms of a manager's discretionary disclosure decision. Unlike prior literature, it explicitly incorporates the agency relationship between the manager and shareholders. In this setting a risk-averse manager may receive private information (Dye, 1985) that, if disclosed, would be used by a firm's board of directors for compensation purposes. In addition, disclosure may be costly (Verrecchia, 1983).;It is shown that when the manager is known to have received an informative signal but disclosure is costly, the board of directors will find it optimal to induce partial disclosure. Further, the non-disclosure region may be located anywhere along the signal distribution (in contrast to Verrecchia, 1983).;When the board of directors is uncertain about the manager's information endowment, the manager withholds private information if it is sufficiently unfavorable. Among other results it is shown that for some commonly-employed signal distributions, the manager's disclosure strategy is not affected by the introduction of the agency problem. It is also shown that the welfare loss shareholders suffer when there is uncertainty over the manager's information endowment may be exacerbated by the imposition of mandatory disclosure. |
