Disclosure, Competition and Learning from Asset Prices

52 Pages Posted: 8 Jan 2018 Last revised: 11 Jan 2020

See all articles by Liyan Yang

Liyan Yang

University of Toronto - Rotman School of Management

Date Written: January 9, 2020

Abstract

I study voluntary disclosure of oligopoly firms when they learn information from asset prices. By disclosing information, a firm incurs a cost of losing competitive advantage to its rivals but benefits from learning from a more informative asset market. Adding a financial market helps the product market to escape from a bad nondisclosure equilibrium. Firms' disclosure decisions can exhibit strategic complementarity, leading to multiple equilibria. Due to the endogenous disclosure behavior of firms, more fierce competition in the product market can reduce consumer surplus and total surplus, and more noise trading in the financial market can increase price informativeness.

Keywords: Disclosure, product market competition, proprietary cost, feedback effect, complementarity, total surplus, price informativeness

JEL Classification: D61, G14, M41

Suggested Citation

Yang, Liyan, Disclosure, Competition and Learning from Asset Prices (January 9, 2020). Rotman School of Management Working Paper No. 3095970, Available at SSRN: https://ssrn.com/abstract=3095970 or http://dx.doi.org/10.2139/ssrn.3095970

Liyan Yang (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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