On the Disclosure of Half-Truths and the Duty to Update

We develop a model of a manager’s equilibrium voluntary disclosure policy to study how that policy changes depending on whether the manager is prohibited from disclosing, or allowed to disclose, a half-truth; we also examine how the disclosure policy changes depending on whether the manager has a duty to update past disclosures. Among our results, we show that if a manager is prohibited from issuing half-truths, the manager discloses a wider array of information than if the manager is allowed to issue half-truths, and investors view the absence of disclosure more skeptically; we also show that imposing a duty to update on the manager does not affect the manager’s initial disclosures, but it results in the manager disclosing uniformly more information over time.