Information Sharing in the Presence of Preemptive Incentives: Economic Consequences of Mandatory Disclosure

Information Sharing in the Presence of Preemptive Incentives: Economic Consequences of Mandatory... Thisstudy examines the welfare implications of a mandatory disclosurerequirement in an oligopolistic market, in which firms can choosetheir output either before or after the resolution of demanduncertainty. Two main results are derived. First, it is shownthat there exists a set of parameter values under which mandatorydisclosure is ineffective in the sense that it does not induceany change in the equilibrium production. Second, for some otherparameter values, imposing mandatory disclosure alters the firms'incentive structure in a way that gives rise to a Pareto lossin welfare; i.e., firms and consumers are made strictly worseoff. These two results suggest that the regulatory implicationsderived from the information-sharing literature should be interpretedwith caution. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Information Sharing in the Presence of Preemptive Incentives: Economic Consequences of Mandatory Disclosure

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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
D.O.I.
10.1023/A:1026597606819
Publisher site
See Article on Publisher Site

Abstract

Thisstudy examines the welfare implications of a mandatory disclosurerequirement in an oligopolistic market, in which firms can choosetheir output either before or after the resolution of demanduncertainty. Two main results are derived. First, it is shownthat there exists a set of parameter values under which mandatorydisclosure is ineffective in the sense that it does not induceany change in the equilibrium production. Second, for some otherparameter values, imposing mandatory disclosure alters the firms'incentive structure in a way that gives rise to a Pareto lossin welfare; i.e., firms and consumers are made strictly worseoff. These two results suggest that the regulatory implicationsderived from the information-sharing literature should be interpretedwith caution.

Journal

Review of Accounting StudiesSpringer Journals

Published: Oct 16, 2004

References

  • Factors Influencing Firms' Disclosures about Environmental Liabilities
    Barth, M.; McNichols, M.; Wilson, P.

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