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Forcing Firms to Talk: Financial Disclosure Regulation and Externalities

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Author Info
Admati, Anat R
Pfleiderer, Paul
Abstract

We analyze a model of voluntary disclosure by firms and the desirability of disclosure regulation. In our model disclosure is costly, it has private and social value, and its precision is endogenous. We show that (i) a convexity in the value of disclosure can lead to a discontinuity in the disclosure policy; (ii) the Nash equilibrium of a voluntary disclosure game is often socially inefficient; (iii) regulation that requires a minimal precision level sometimes but not always improves welfare; (iii) the same is true for subsidies that change the perceived cost of disclosures; and (iv) neither regulation method dominates the other. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

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Publisher Info
Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 13 (2000)
Issue (Month): 3 ()
Pages: 479-519
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:oup:rfinst:v:13:y:2000:i:3:p:479-519

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Web: http://www4.oup.co.uk/revfin/subinfo/

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  1. Greenstone, Michael & Oyer, Paul & Vissing-Jorgensen, Annette, 2005. "Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments," Research Papers 1869r, Stanford University, Graduate School of Business. [Downloadable!]
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  2. Ari Hyytinen & Lotta Väänänen, 2004. "Mandatory Auditor Choice and Small Finance: Evidence from Finland," Discussion Papers 950, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Chen, Yehning & Hasan, Iftekhar, 2005. "The transparency of the banking industry and the efficiency of information-based bank runs," Research Discussion Papers 24/2005, Bank of Finland. [Downloadable!]
  4. Benito Arruñada, 2008. "Mandatory Accounting Disclosure by Small Private Companies," Economics Working Papers 1090, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  5. Bardong, Florian & Bartram, Söhnke M. & Yadav, Pradeep K., 2005. "Informed Trading, Information Asymmetry and Pricing of Information Risk: Empirical Evidence from the NYSE," MPRA Paper 13586, University Library of Munich, Germany, revised 10 Oct 2008. [Downloadable!]
  6. Ari Hyytinen & Mika Pajarinen, 2005. "External Finance, Firm Growth and the Benefits of Information Disclosure: Evidence from Finland," European Journal of Law and Economics, Springer, vol. 19(1), pages 69-93, January. [Downloadable!] (restricted)
  7. Bardong, Florian & Bartram, Söhnke M. & Yadav, Pradeep K., 2006. "The Effect of Corporate Break-ups on Information Asymmetry: A Market Microstructure Analysis," MPRA Paper 13155, University Library of Munich, Germany, revised 26 Oct 2008. [Downloadable!]
  8. Acharya, Viral V & DeMarzo, Peter & Kremer, Ilan, 2008. "Endogenous Information Flows and the Clustering of Announcements," CEPR Discussion Papers 6985, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Mary Margaret Myers & James M. Poterba & Douglas A. Shackelford, 2001. "Copycat Funds: Information Disclosure Regulation and the Returns to Active Management in the Mutual Fund Industry," NBER Working Papers 8653, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Ari Hyytinen & Tuomas Takalo, 2002. "Enchancing Bank Transparency : A Re-assessment," Discussion Papers 828, The Research Institute of the Finnish Economy. [Downloadable!]
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  11. Ari Hyytinen & Mika Pajarinen, 2003. "External Finance, Firm Growth and the Benefits of Information Disclosure: Evidence from Finland (Revised)," Discussion Papers 805, The Research Institute of the Finnish Economy. [Downloadable!]
  12. Brian J. Bushee & Christian Leuz, 2003. "Economic Consequences of SEC Disclosure Regulation," Center for Financial Institutions Working Papers 02-24, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
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