Entry and capital structure mimicking in concentrated markets: The role of incumbents’ financial disclosures

Darren Bernard, Devrimi Kaya and John Wertz

Journal of Accounting and Economics, 2021, vol. 71, issue 2

Abstract: We examine whether the public availability of product market incumbents' financial disclosures leads to greater capital structure mimicking of incumbents by entrants. Exploiting a change in disclosure enforcement for German private firms in the mid-2000s, we find entrant-incumbent mimicking rises substantially in concentrated markets once incumbents' financial statements are publicly available. Additional tests exploring potential mechanisms are more consistent with interfirm learning underlying the effect than alternative channels. Our findings shed light on the effects of competitor financial statement disclosure on private firms’ initial financing decisions and highlight how capital structure dependencies among peer firms arise.

Keywords: Disclosure; Capital structure; Private firms; Product markets; Mimicking (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:71:y:2021:i:2:s0165410120300811

DOI: 10.1016/j.jacceco.2020.101379

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