Discussion paper

DP17736 Public Information as a Source of Disagreement Among Shareholders

We study how beliefs about firm value respond to public information stemming from either public announcements or shareholder meetings. We focus on settings with homogeneous shareholders (i.e., agents with common preferences and opinions), where information is about which course of action is best for the firm. The analysis illustrates that extant work dismissing homogeneous shareholders models has over-reached. Counter to the received wisdom, these models can explain increases in trading volume after public events (a pattern which is documented by several empirical papers). Two economic insights surface. First, when homogeneous shareholders anticipate that firm decisions will be guided by information, the presence of differences in belief about the firm's fundamentals and best course of action need not lead to differences in belief about firm value. Second, when voting is not fully informative, homogeneous shareholders will seek to generate informational rents from trading after the vote. Both of these incentive effects will tend to generate increases in trading volume after public events.


Bouton, L, A Llorente-Saguer, A Macé, A Meirowitz, S Pi and D Xefteris (2022), ‘DP17736 Public Information as a Source of Disagreement Among Shareholders‘, CEPR Discussion Paper No. 17736. CEPR Press, Paris & London. https://cepr.org/publications/dp17736