Incentives for Risk Reporting with Potential Market Entrants

Anne Chwolka () and Nicole Kusemitsch ()
Additional contact information
Anne Chwolka: Otto-von-Guericke University Magdeburg
Nicole Kusemitsch: Otto-von-Guericke University Magdeburg

A chapter in Operations Research Proceedings 2011, 2012, pp 553-558 from Springer

Abstract: Abstract We analyze a situation in which an incumbent firm, endowed with private information about a risk factor in its market, can credibly disclose quantitative risk information to the market and, thus, also to its opponents. Favorable information increases the market price of the firm, but it may also induce the opponent to enter the market, which imposes a proprietary cost on the firm. We show that there exist partial-disclosure equilibria with two distinct nondisclosure intervals. If the firm does not disclose, the opponent will not enter the market. We conclude that one reason for the empirically observed lack of quantitative risk disclosure is the fact that firms are required to explain the underlying assumptions and models that they use to measure the risk, which can lead to important competitive disadvantages.

Keywords: Market Price; Credit Rating; Risk Information; Market Entrance; Voluntary Disclosure (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:oprchp:978-3-642-29210-1_88

Ordering information: This item can be ordered from
http://www.springer.com/9783642292101

DOI: 10.1007/978-3-642-29210-1_88

Access Statistics for this chapter

More chapters in Operations Research Proceedings from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().