On the synergy between disclosure and investment beauty contests

Anil Arya and Brian Mittendorf

Journal of Accounting and Economics, 2016, vol. 61, issue 2, 255-273

Abstract: Many investments are noted for their "beauty contest" features in that decision makers desire conformity with others׳ choices due to inherent complementarities. This paper examines the incentives of firms to take preemptive action and publicly disclose their investments in such beauty contests. In this case, it is the beauty contest desire for coordination that incentivizes a firm to disclose because doing so allows it to convey information that establishes norms and thereby influence subsequent actions of others. Disclosure recipients too benefit from this arrangement because they access additional information on which to base their decisions.

Keywords: Beauty contests; Disclosure; Private information (search for similar items in EconPapers)
JEL-codes: D21 D82 M41 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:61:y:2016:i:2:p:255-273

DOI: 10.1016/j.jacceco.2015.11.003

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