The Race Towards Transparency: An Experimental Investigation

Marco Rossi

Economic Notes, 2002, vol. 31, issue 3, 523-545

Abstract: type="main" xml:lang="en">

To understand the current tendency toward transparency, we studied the effects of accounting disclosure in a laboratory. In our experiment, transparency in the financial accounts of the listed companies improved information efficiency; but, even after checking for fundamentals, the transparency increased the volatility of market prices. Moreover, transparency improved investors’ utility, so that their preference for more certain assets emerged. Therefore, we argue that the current race toward transparency may be better explained by firms’ and markets’ intention to attract household investments rather than to improve market efficiency.

(J.E.L.: G92, D44, D81, G12, G28).

Date: 2002
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