Learning to Disclose: Disclosure Dynamics in the 1890s Streetcar Industry

Thomas Bourveau, Matthias Breuer and Robert Stoumbos

The Review of Financial Studies, 2025, vol. 38, issue 9, 2602-2651

Abstract: We study the influence of bounded rationality on companies’ disclosure to investors in new industries. Using a historical example of a new industry, we document that several companies initially withheld their earnings, despite external capital needs and investor information demands. However, almost all these companies started disclosing shortly thereafter. Interpreted through the lens of a disclosure model featuring level- thinking, these patterns suggest that limited strategic thinking of some companies contributed to the initial failure to disclose, while feedback and learning over time contributed to the quick convergence to an equilibrium of (almost) full disclosure in the new industry.

Date: 2025
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