Strategic Transparency and Informed Trading: Will Capital Market Integration Force Convergence of Corporate Governance ?
Enrico Perotti (e.c.perotti@uva.nl) and
Ernst-Ludwig von Thadden
Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie
Abstract:
Dominant investors can influence the publicly available information about firms by affecting the cost of information collection. Under strategic competition, transparency results in higher variability of profits and output. Thus lenders prefer less transparency, since this protects firms when in a weak competitive position, while equityholders prefer more. Market interaction creates strategic complementarity in gathering information on competing firms, thus entry by transparent competitors will affect price informativeness. Moreover, as the return to information gathering increases with liquidity, increasing global trading may undermine the ability of bank control to keep firms opaque.
Keywords: corporate transparency; corporate governance; financial markets; product market competition (search for similar items in EconPapers)
JEL-codes: D21 D43 G32 L21 (search for similar items in EconPapers)
Pages: 39 pages
Date: 1998-02, Revised 2002-07
New Economics Papers: this item is included in nep-pol
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Citations: View citations in EconPapers (9)
Published in Journal of Law, Economics and Organization, vol. 21 (1), October 2005, pp. 76-102 (Revised version: "Outside Finance, Dominant Investors and Strategic Transparency, Cahier 01.02, December 2000)
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Journal Article: Strategic Transparency and Informed Trading: Will Capital Market Integration Force Convergence of Corporate Governance? (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:9804
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