On the disclosure of half-truths and the duty to update

While disclosing half-truths is generally considered illegal under corporate securities laws, what constitutes a half-truth is often unclear. It is also unclear when a public company has a duty to update previously disclosed information. This paper explores the economic effects of both narrow and expansive definitions of half-truths, as well as the economic effects of imposing or not imposing a duty to update. Among our major findings is the conclusion that an expansive definition of half-truths results in managers disclosing a broader array of their private information than does a narrow definition of half-truths, and imposing a duty to update has no effect on manager's incentives to disclose information at the time the manager initially receives information, but over time results in the disclosure of uniformly more information.