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Disclosure Policy and Industry Fluctuations

Author

Listed:
  • Jeremy Bertomeu

    (Stan Ross Department of Accountancy, Zicklin School of Business, Baruch College, New York, New York 10010)

  • Pierre Jinghong Liang

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213; and China Academy of Financial Research, 200030 Shanghai, China)

Abstract

This paper examines voluntary disclosures in a repeated oligopoly and their association with price-setting behavior and industry profits along industrial fluctuations. The analysis focuses on the collectively optimal equilibrium among oligopoly firms. We show that, in industries that are highly concentrated or feature low cost of capital, nondisclosure is prevalent and results in stable product prices and high profit margins. Otherwise, firms may selectively disclose to soften competition in the product market. Under partial disclosure, firms withhold information during sharp industry expansions or declines. Consequently, the disclosure policy dampens the dissemination of shocks to the industry. This paper was accepted by Mary Barth, accounting .

Suggested Citation

  • Jeremy Bertomeu & Pierre Jinghong Liang, 2015. "Disclosure Policy and Industry Fluctuations," Management Science, INFORMS, vol. 61(6), pages 1292-1305, June.
    • Handle: RePEc:inm:ormnsc:v:61:y:2015:i:6:p:1292-1305
    DOI: 10.1287/mnsc.2014.2003
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    References listed on IDEAS

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    3. Jung Min Kim & Daniel J. Taylor & Robert E. Verrecchia, 2021. "Voluntary disclosure when private information and disclosure costs are jointly determined," Review of Accounting Studies, Springer, vol. 26(3), pages 971-1001, September.

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