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Voluntary disclosure and market competition: Theory and evidence from the U.S. services sector

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  • Orhun, Eda

Abstract

This paper analyses a firm's incentives to disclose private information about market demand and its cost when there is a potential market entrant. A partially pooling disclosure equilibrium exists in which high demand-high cost and low demand-high cost types of firms are nontransparent in the case of risky debt issuance. I use a sample of U.S. service firms to test the theoretical predictions. Consistent with the model's implications, among low-debt service firms those that are high demand-high cost are likely to avoid information disclosure, whereas among high-debt firms those that are high demand-high cost and low demand-high cost are less likely to disclose private information.

Suggested Citation

  • Orhun, Eda, 2019. "Voluntary disclosure and market competition: Theory and evidence from the U.S. services sector," Research in International Business and Finance, Elsevier, vol. 47(C), pages 354-370.
    • Handle: RePEc:eee:riibaf:v:47:y:2019:i:c:p:354-370
    DOI: 10.1016/j.ribaf.2018.08.009
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    More about this item

    Keywords

    Voluntary disclosure; Market competition; Analyst forecast; Leverage;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L8 - Industrial Organization - - Industry Studies: Services
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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