The Release of Propreitary Information as a Means of Reducing Competitive Costs

Brett Trueman

University of California at Los Angeles, Anderson Graduate School of Management from Anderson Graduate School of Management, UCLA

Abstract: There have recently been studies which have shown that corporate managers may have incentives to release private information. A common thread through these studies is that the release of private information may also entail costs by providing competitors with valuable information. However, as is shown here, the release of private information may in many cases reduce, rather than enhance, competitive pressures, by lowering competitors’ expected output and thereby increasing the expected price of industry output. The reduction in competition alone, then, may be an additional motivation for disclosing private information. An implication of this is that a firm with private information may be willing to join an industry trade association even if it expects to gain little, if any, new information from the association. It also implies that such a firm will not necessarily oppose the mandatory release of additional proprietary information in its financial statements, such as line of business data or earnings forecasts.

Date: 1986-07-01
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