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Competitive Effects of Disclosure in a Strategic Entry Model

Competitive Effects of Disclosure in a Strategic Entry Model We investigate the welfare consequences of incumbent firms' mutual disclosure of cost information when there is a threat of entry from a firm not required to disclose its private cost information. New effects of disclosure are observed relative to no-entry models, with the result that incumbents' expected output is a decreasing function of the disclosure level. However, further analysis shows that increased disclosure usually increases incumbent expected profits and decreases expected consumer surplus, despite the additional entry effect of disclosure. Such analytical derivations provide objective input to the FASB as they attempt to predict the competitive effects of changing mandated disclosure requirements. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Competitive Effects of Disclosure in a Strategic Entry Model

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References (25)

Publisher
Springer Journals
Copyright
Copyright © 2000 by Kluwer Academic Publishers
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
DOI
10.1023/A:1009664918749
Publisher site
See Article on Publisher Site

Abstract

We investigate the welfare consequences of incumbent firms' mutual disclosure of cost information when there is a threat of entry from a firm not required to disclose its private cost information. New effects of disclosure are observed relative to no-entry models, with the result that incumbents' expected output is a decreasing function of the disclosure level. However, further analysis shows that increased disclosure usually increases incumbent expected profits and decreases expected consumer surplus, despite the additional entry effect of disclosure. Such analytical derivations provide objective input to the FASB as they attempt to predict the competitive effects of changing mandated disclosure requirements.

Journal

Review of Accounting Studies – Springer Journals

Published: Oct 16, 2004

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