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Dominant Investors and Strategic Transparency Author info | Abstract | Publisher info | Download info | Related research | Statistics Enrico C. Perotti (University of Amsterdam and CEPR)
Ernst-Ludwig von Thadden (University of Lausanne and CEPR)
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This paper studies product market competition under a strategic transparency decision. Dominant investors can influence information collection in the financial market, and thereby corporate transparency, by affecting market liquidity or the cost of information collection. More transparency on a firm's competitive position has both strategic advantages and disadvantages: in general, transparency results in higher variability of profits and output. Thus lenders prefer less information revelation through stock market trading, since this protects firms when in a weak competitive position, while equityholders prefer more to make full use of the strategic advantage of a strong firm. We show that bank-controlled firms will tend to discourage trading to reduce price informativeness, while shareholder-run firms prefer more transparency. Our comparitive statics show that bank control may fail to keep firms less transparent as global trading volumes rise.
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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number
1999.24.
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Keywords: Transparency Bank control product market competition Other versions of this item:
Find related papers by JEL classification: G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies G20 - Financial Economics - - Financial Institutions and Services - - - General L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Thierry Tressel & Enrica Detragiache & Asli Demirgüç-Kunt, 2006.
"Banking on the Principles: Compliance with Basel Core Principles and Bank Soundness ,"
IMF Working Papers
06/242, International Monetary Fund.
[Downloadable!]
Other versions: Enrico Perotti & Ernst-Ludwig von Thadden, 2005.
"The Political Economy of Corporate Control ,"
Tinbergen Institute Discussion Papers
05-102/2, Tinbergen Institute.
[Downloadable!]
Degryse, H. & Ongena, S., 2000.
"Bank relationships and firm profitability ,"
Discussion Paper
14, Tilburg University, Center for Economic Research.
[Downloadable!]
Other versions: Enrico C. Perotti & Ernst-Ludwig von Thadden, 2004.
"The Political Economy of Dominant Investors ,"
Tinbergen Institute Discussion Papers
04-091/2, Tinbergen Institute.
[Downloadable!]
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