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Author: Yong-Chul Shin
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper investigates empirically the effect of different types of product market competition on levels of voluntary disclosure of proprietary information in financial markets. Firms, considering a disclosure, trade off attaining financial market valuation-related benefits vs. protecting long-term product market advantage. Based on economic theory, I propose that there are two types of strategic interaction settings relevant to disclosure: Capacity competition drives firms to disclose more; price competition drives them to disclose less. When firms are competing on capacities, firms disclose more information to lower the cost of capital needed for capital investments. In contrast, when firms are competing on prices, they disclose less information because proprietary costs are high and the benefit from any decreased cost of capital is low due to less acute need for additional capital. By estimating the signs of the slope of reaction curves to identify the type of competition facing firms in oligopoly markets, I find that the type of product market competition affects the level of voluntary disclosure over and above what pervious literature has documented as the firm's external financing needs. That is, firms engaged in capacity competition disclose relatively more information than firms engaged in price competition. Further analysis after including as benchmarks firms with no strategic interaction, shows that capacity competition firms disclose more information than no-strategic-interaction firms but that price competition firms do not disclose less information than no-strategic-interaction firms.
Author: Yong-Chul Shin
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper investigates empirically the effect of different types of product market competition on levels of voluntary disclosure of proprietary information in financial markets. Firms, considering a disclosure, trade off attaining financial market valuation-related benefits vs. protecting long-term product market advantage. Based on economic theory, I propose that there are two types of strategic interaction settings relevant to disclosure: Capacity competition drives firms to disclose more; price competition drives them to disclose less. When firms are competing on capacities, firms disclose more information to lower the cost of capital needed for capital investments. In contrast, when firms are competing on prices, they disclose less information because proprietary costs are high and the benefit from any decreased cost of capital is low due to less acute need for additional capital. By estimating the signs of the slope of reaction curves to identify the type of competition facing firms in oligopoly markets, I find that the type of product market competition affects the level of voluntary disclosure over and above what pervious literature has documented as the firm's external financing needs. That is, firms engaged in capacity competition disclose relatively more information than firms engaged in price competition. Further analysis after including as benchmarks firms with no strategic interaction, shows that capacity competition firms disclose more information than no-strategic-interaction firms but that price competition firms do not disclose less information than no-strategic-interaction firms.
Author: Li, Xi
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This study examines how firms' voluntary disclosure decisions are influenced by product market competition. Using separate measures to capture different dimensions of competition, I show that competition from potential entrants increases disclosure quantity while competition from existing rivals decreases disclosure quantity. I also find that competition enhances disclosure quality mainly through reducing the optimism in profit forecasts and reducing the pessimism in investment forecasts. Moreover, I find that the above association is less pronounced for industry leaders, consistent with industry leaders facing less competitive pressures than industry followers.
Author: Narayanaswamy Ramaswami
Publisher:
ISBN:
Category : Competition
Languages : en
Pages : 338
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Book Description
Author: Hanyong Chung
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 0
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Book Description
This study examines how product market competition affects firms' mandatory disclosure strategies. Using the information in the SEC comment letters, I observe that firms in a highly competitive market are more likely to file unaudited mandatory disclosures with deficiency. I also find that firms facing higher competition from potential entrants tend to bundle positive (negative) mandatory items with the negative (positive) management earnings forecasts. These findings support my conjecture that firms exercise discretion in the mandatory disclosure through less transparent ways, due to a proprietary cost resulting from market competition. Additional analyses demonstrate a positive economic consequence of such disclosure strategy, and the relationship between market competition and mandatory disclosure strategies is stronger for industry followers than for industry leaders.
Author: Daniel Hoang
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
This paper studies the effects of hedge disclosure requirements on corporate risk management and product market competition. The analysis is based on a model of market entry and shows that to prevent entry incumbent firms engage in risk management when these activities remain unobserved by outsiders. In the resulting equilibrium, financial markets are well informed and entry is efficient. However, potential attempts for more transparency by additional disclosure requirements introduce a commitment device that provides incumbents with incentives to distort risk management activities thereby influencing entrant beliefs. In equilibrium, firms engage in significant risk-taking. This behavior limits entry and adversely affects the nature of competition in industries.
Author: Jennifer Jane Baggs
Publisher:
ISBN: 9780662443018
Category : Competition
Languages : en
Pages : 42
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Book Description
"Economists have long held the belief that competition improves efficiency. One of the mechanisms suggested is that product market competition alleviates agency costs, which in turn many enable firms to induce higher effort and greater efficiency from their managers. In this way, competition mitigates what Leibenstein (1966) called 'X-inefficiencies.' Despite growing interest, an unambiguous theoretical formulation for this 'vague suspicion' has proved difficult to obtain. In this paper we examine the impact of competition on efficiency both theoretically and empirically. The main theoretical contribution of this paper is to show that product market competition can have a direct, and ambiguously positive effect on managerial incentives."--Unedited text from document.
Author: Jidong Zhang
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
The relation between the motivation of voluntary disclosure and the characters of companies is important research topic in accounting research and strategy research. The paper investigates the samples from Chinese capital market during 2004-2006 and concludes some empirical results to verify and support the strategy theory that pre-literatures had document through the analysis of game theory. The findings are that there is no significant relationship between industry competitive information voluntary disclosure and corporate governance and there is no significant relationship between industry competitive information voluntary disclosure and earning quality. As the analysis of strategy theory, there is significant relationship between industry competitive information voluntary disclosure and corporate competitive strategy which integrates with the status of market competitive where the corporate locates. If the corporate locates in growth period of Product Life Cycle (PLC), it is more possible to disclose industry competitive information and this motivation is obvious. The findings provide the empirical evidence of strategy competitive theory. These also implicate that voluntary disclosure is related to the disclosure content, not to corporate characters such as governance and earning quality.
Author: Chandra Kanodia
Publisher: Now Publishers Inc
ISBN: 1601980620
Category : Business & Economics
Languages : en
Pages : 105
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Book Description
Kanodia presents a new approach to the study of accounting measurement that argues that how firms' economic transactions, earnings, and capital flows are measured and reported to the capital markets has substantial effects on the firms' real decisions and on the allocation of resources.
Author: Kose John
Publisher: Emerald Group Publishing
ISBN: 1783501219
Category : Business & Economics
Languages : en
Pages : 269
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Book Description
Advances in Financial Economics Vol. 16 contains a set of empirical papers by a set of global scholars who examine corporate governance and market regulation from a variety of perspectives.
Author: Harry DeAngelo
Publisher: Now Publishers Inc
ISBN: 1601982046
Category : Corporations
Languages : en
Pages : 215
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Book Description
Corporate Payout Policy synthesizes the academic research on payout policy and explains "how much, when, and how". That is (i) the overall value of payouts over the life of the enterprise, (ii) the time profile of a firm's payouts across periods, and (iii) the form of those payouts. The authors conclude that today's theory does a good job of explaining the general features of corporate payout policies, but some important gaps remain. So while our emphasis is to clarify "what we know" about payout policy, the authors also identify a number of interesting unresolved questions for future research. Corporate Payout Policy discusses potential influences on corporate payout policy including managerial use of payouts to signal future earnings to outside investors, individuals' behavioral biases that lead to sentiment-based demands for distributions, the desire of large block stockholders to maintain corporate control, and personal tax incentives to defer payouts. The authors highlight four important "carry-away" points: the literature's focus on whether repurchases will (or should) drive out dividends is misplaced because it implicitly assumes that a single payout vehicle is optimal; extant empirical evidence is strongly incompatible with the notion that the primary purpose of dividends is to signal managers' views of future earnings to outside investors; over-confidence on the part of managers is potentially a first-order determinant of payout policy because it induces them to over-retain resources to invest in dubious projects and so behavioral biases may, in fact, turn out to be more important than agency costs in explaining why investors pressure firms to accelerate payouts; the influence of controlling stockholders on payout policy --- particularly in non-U.S. firms, where controlling stockholders are common --- is a promising area for future research. Corporate Payout Policy is required reading for both researchers and practitioners interested in understanding this central topic in corporate finance and governance.
