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Voluntary disclosure and market competition: Theory and evidence from the U.S. services sector

Eda Orhun

Research in International Business and Finance, 2019, vol. 47, issue C, 354-370

Abstract: This paper analyses a firm's incentives to disclose private information about market demand and its cost when there is a potential market entrant. A partially pooling disclosure equilibrium exists in which high demand-high cost and low demand-high cost types of firms are nontransparent in the case of risky debt issuance. I use a sample of U.S. service firms to test the theoretical predictions. Consistent with the model's implications, among low-debt service firms those that are high demand-high cost are likely to avoid information disclosure, whereas among high-debt firms those that are high demand-high cost and low demand-high cost are less likely to disclose private information.

Keywords: Voluntary disclosure; Market competition; Analyst forecast; Leverage (search for similar items in EconPapers)
JEL-codes: G14 L13 L8 M41 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:47:y:2019:i:c:p:354-370

DOI: 10.1016/j.ribaf.2018.08.009

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