Learning to Disclose: Disclosure Dynamics in the 1890s Streetcar Industry

113 Pages Posted: 18 Feb 2021 Last revised: 6 Apr 2023

See all articles by Thomas Bourveau

Thomas Bourveau

Columbia University - Columbia Business School, Accounting, Business Law & Taxation

Matthias Breuer

Columbia University - Columbia Business School, Accounting, Business Law & Taxation

Robert Stoumbos

ESSEC Business School

Date Written: December 30, 2020

Abstract

We study the influence of bounded rationality on companies’ disclosure to investors in new industries. Using a historical example of a new industry, we document that several companies initially withheld their earnings, despite external capital needs and investor information demands. However, almost all these companies started disclosing shortly thereafter. Interpreted through the lens of a disclosure model featuring level-k thinking, these patterns suggest that limited strategic thinking of some companies contributed to the initial failure to disclose, while feedback and learning over time contributed to the quick convergence to an equilibrium of (almost) full disclosure in the new industry.

Keywords: Disclosure, Dynamics, Rational Expectations, Learning, History

JEL Classification: D82, D83, D84, D91, K22, L92, M41, M48, N21, N71

Suggested Citation

Bourveau, Thomas and Breuer, Matthias and Stoumbos, Robert, Learning to Disclose: Disclosure Dynamics in the 1890s Streetcar Industry (December 30, 2020). Available at SSRN: https://ssrn.com/abstract=3757679 or http://dx.doi.org/10.2139/ssrn.3757679

Thomas Bourveau

Columbia University - Columbia Business School, Accounting, Business Law & Taxation ( email )

3022 Broadway
New York, NY 10027
United States

Matthias Breuer (Contact Author)

Columbia University - Columbia Business School, Accounting, Business Law & Taxation ( email )

3022 Broadway
New York, NY 10027
United States

Robert Stoumbos

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

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