Disclosure, Competition, and Learning from Asset Prices

51 Pages Posted: 8 Jan 2018 Last revised: 30 Apr 2019

See all articles by Liyan Yang

Liyan Yang

University of Toronto - Rotman School of Management

Date Written: January 2019

Abstract

I study voluntary disclosure of duopoly firms when they learn information from asset prices. By disclosing information, a firm incurs a cost of losing competitive advantage to its rival firm but benefits from learning from a more informative asset market. Three types of equilibrium arise: nondisclosure, partial disclosure, and full disclosure. In a partial disclosure equilibrium, price informativeness and firm profits increase with the size of noise trading in the financial market. Firms' disclosure decisions can exhibit strategic complementarity, which leads to both a disclosure equilibrium and a nondisclosure equilibrium.

Keywords: Disclosure, product market competition, proprietary cost, feedback effect, complementarity and multiplicity.

JEL Classification: D61, G14, M41

Suggested Citation

Yang, Liyan, Disclosure, Competition, and Learning from Asset Prices (January 2019). 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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