Delegating Disclosure and Control *

We study the joint delegation of operating and disclosure choices in a multiprincipal agent setting. We find that joint delegation alters both the incentives to deviate from profit– maximizing operating choices and disclosure policy adoption choices. Incentive weights on revenues are greater for the firm with greater ex ante cost uncertainty, greater expected market size and greater expected profit margins. Further, relative to no delegation, joint delegation biases the disclosure choice away from disclosing information about the firm’s own costs and toward disclosing information that helps the rival better understand its costs for the firm opting to place greater incentive weight on revenues. The bias is reversed for the firm choosing smaller incentive weights. Thus, our analysis suggests that the market receives more information about the cost structure of firms with smaller expected profit margins, market sizes and ex ante cost uncertainty and less information about the cost structure of firms with larger expected margins, market sizes and ex ante cost uncertainty. ∗ We gratefully acknowledge the financial support provided by the Krannert Graduate School of Management and Purdue University.