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Evolutionary model of existing competition and voluntary disclosure

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  • Manuel Núñez-Nickel

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  • Susana Gago Rodríguez

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    Abstract

    We analyze how, in the absence of capital market incentives, the influence of existing competition on voluntary disclosure is an evolving process which has a non-monotonic design. The progressive capability of rivals to forecast significant information and the increasing losses of abnormal profits during the industry life cycle generate fears and incentives that change the sign of the relationship between competition and the probability of voluntary disclosure throughout the industry’s development. We support this new design empirically by applying a semi-parametric Cox model to 28 years of archival data for the entire Spanish newspaper sector. We also find that the best fitting model is the first harmonic of a Fourier series

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    Bibliographic Info

    Paper provided by Universidad Carlos III, Instituto sobre Desarrollo Empresarial "Carmen Vidal Ballester" in its series Business Economics Working Papers with number id-10-06.

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    Date of creation: Oct 2010
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    Handle: RePEc:cte:idrepe:id-10-06

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    Keywords: Competition; Voluntary disclosure; Fourier series; Cox model;

    This paper has been announced in the following NEP Reports:

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    1. Darrough, Masako N. & Stoughton, Neal M., 1990. "Financial disclosure policy in an entry game," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 12(1-3), pages 219-243, January.
    2. Heitzman, Shane & Wasley, Charles & Zimmerman, Jerold, 2010. "The joint effects of materiality thresholds and voluntary disclosure incentives on firms' disclosure decisions," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 49(1-2), pages 109-132, February.
    3. Ashiq Ali & Sandy Klasa & Eric Yeung, 2009. "The Limitations of Industry Concentration Measures Constructed with Compustat Data: Implications for Finance Research," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 22(10), pages 3839-3871, October.
    4. Leuz, Christian & Pfaff, Dieter & Hopwood, Anthony (ed.), 2004. "The Economics and Politics of Accounting: International Perspectives on Trends, Policy, and Practice," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199260621, October.
    5. Wagenhofer, Alfred, 1990. "Voluntary disclosure with a strategic opponent," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 12(4), pages 341-363, March.
    6. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 562-83, June.
    7. Verrecchia, Robert E., 1990. "Endogenous proprietary costs through firm interdependence," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 12(1-3), pages 245-250, January.
    8. John R. Graham & Campbell R. Harvey & Shiva Rajgopal, 2004. "The Economic Implications of Corporate Financial Reporting," NBER Working Papers 10550, National Bureau of Economic Research, Inc.
    9. Robert E. Verrecchia & Joseph Weber, 2006. "Redacted Disclosure," Journal of Accounting Research, Wiley Blackwell, Wiley Blackwell, vol. 44(4), pages 791-814, 09.
    10. Dedman, Elisabeth & Lennox, Clive, 2009. "Perceived competition, profitability and the withholding of information about sales and the cost of sales," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 48(2-3), pages 210-230, December.
    11. Ginger Zhe Jin, 2005. "Competition and Disclosure Incentives: An Empirical Study of HMOs," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 93-112, Spring.
    12. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 24(3), pages 461-83, December.
    13. Ettredge, Michael & Kwon, Soo Young & Smith, David, 2002. " Security Market Effects Associated with SFAS No. 131: Reported Business Segments," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 18(4), pages 323-44, June.
    14. Arya, Anil & Mittendorf, Brian, 2005. "Using disclosure to influence herd behavior and alter competition," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 40(1-3), pages 231-246, December.
    15. Leland, Hayne E, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality: Comment," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 24(3), pages 485-89, December.
    16. Verrecchia, Robert E., 1983. "Discretionary disclosure," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 5(1), pages 179-194, April.
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