Entry and Capital Structure Mimicking in Concentrated Markets: the Role of Incumbents' Financial Disclosures
56 Pages Posted: 11 Nov 2018 Last revised: 12 Nov 2020
Date Written: November 11, 2020
We examine whether the public availability of product market incumbents’ financial disclosures leads to greater capital structure mimicking of incumbents by entrants. Exploiting a change in disclosure enforcement for German private firms in the mid-2000s, we find entrant-incumbent mimicking rises substantially in concentrated markets once incumbents’ financial statements are publicly available. Additional tests exploring potential mechanisms are more consistent with interfirm learning underlying the effect than alternative channels. Our findings shed light on the effects of competitor financial statement disclosure on private firms’ initial financing decisions and highlight how capital structure dependencies among peer firms arise.
Keywords: public disclosure, capital structure, private firms, mimicking
JEL Classification: G32, M41
Suggested Citation: Suggested Citation