Aswath Damodaran 32
Managers control the release of information to the general
public
! Information (especially negative) is sometimes suppressed or delayed by
managers seeking a better time to release it.
! In some cases, firms release intentionally misleading information about their
current conditions and future prospects to financial markets.
Consider an example of Bre-X, which told markets that it had found one of the
largest gold reserves in the world in Indonesia in the early 1990s. In 1997, it
was revealed that there was no gold, and that the firm had salted the mine with
gold to fool investors. When the news eventually came out, the stock price
dropped to zero.
Bre-X was followed by 9 analysts, all of whom professed to be shocked by the
revelation.
