This article examines the temporal conflict between current and future investors. Although disclosure can reduce the information asymmetry between a firm and investors in the firm's securities, disclosure itself involves probabilities and difficult judgment choices and often is ambiguous. If a risk is possible though unlikely, should management disclose it? If the risk should be disclosed, how prominently should it be disclosed? These questions highlight the temporal conflict: disclosure of a possible risk harms a firm's current investors, and the more prominent the disclosure, the greater their harm; but failure to disclose the risk, or to give sufficient prominence to the disclosure, may harm the firm's future investors. The article's purpose is both positive and normative: to explain the conflict and its attendant problems, and to help resolve the conflict by analyzing, in each case, who should be included in the relevant audience.
Steven L. Schwarcz, Temporal Perspectives: Resolving the Conflict Between Current and Future Investors, 89 Minnesota Law Review 1044-1091 (2005).