Dominant investors and strategic transparency


Perotti, Enrico C. ; Thadden, Ernst-Ludwig von



URL: https://ideas.repec.org/p/cpr/ceprdp/1948.html
Additional URL: https://www.feem.it/en/publications/feem-working-p...
Document Type: Working paper
Year of publication: 1999
The title of a journal, publication series: FEEM working papers "Note di lavoro" series
Volume: 1999-24
Place of publication: Milano
Publishing house: Fondazione Eni Enrico Mattei
Publication language: English
Institution: School of Law and Economics > VWL, Mikroökonomische Theorie (von Thadden)
Subject: 330 Economics
Abstract: This paper studies product market competition under a strategic transparency decision. Dominant investors can influence information collection in the financial market, and thereby corporate transparency, by affecting market liquidity or the cost of information collection. More transparency on a firm's competitive position has both strategic advantages and disadvantages: in general, transparency results in higher variability of profits and output. Thus lenders prefer less information revelation through stock market trading, since this protects firms when in a weak competitive position, while equityholders prefer to make full use of the strategic advantage of a strong firm. We show that bank-controlled firms will tend to discourage trading to reduce price informativeness, while shareholder-run firms prefer more transparency. Our comparative statics show that bank control may fail to keep firms less transparent as global trading volumes rise.

Dieser Datensatz wurde nicht während einer Tätigkeit an der Universität Mannheim veröffentlicht, dies ist eine Externe Publikation.




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Perotti, Enrico C. ; Thadden, Ernst-Ludwig von (1999) Dominant investors and strategic transparency. FEEM working papers "Note di lavoro" series Milano 1999-24 [Working paper]


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