Facilitating Tacit Collusion through Voluntary Disclosure: Evidence from Common Ownership

Abstract

We examine whether voluntary disclosure is associated with incentives for firms to collude. Public disclosure can facilitate collusion by aiding in coordination and monitoring for defections. Using common ownership (investors holding stock in competing firms) to identify reduced incentives to compete, we find a positive association between public disclosure and these incentives. We also find common ownership is positively associated with measures of disclosure that are likely to facilitate tacit collusion and that this association is stronger in industries where collusion is easier. Our study expands the literature on disclosure and competition among firms by showing public disclosure is positively associated with incentives for tacit collusion. This finding is consistent with managers facilitating anticompetitive outcomes using voluntary disclosure.

Keywords: Disclosure, Tacit Collusion, Common Ownership, Competition, Anticompetitive Effects

JEL Classification: M40, M41, D22, L11, L41, L44, G34