סמינר במימון חשבונאות
On Market Concentration and Disclosure
Amir Ziv, Columbia University
The empirical literature often uses market concentration as a surrogate for competition, and provides inconsistent, and at best weak, support for the relationship between market concentration and disclosure. Indeed, existing economic theory suggests competition should affect companies’ disclosure choices; however, it never defines competition as market concentration. We investigate whether market concentration is associated with firms’ disclosures under different market structures and informational environments that are often analyzed in standard competition models.
We show that concentration (exogenous or endogenous) is irrelevant in explaining equilibrium disclosure levels. However, in a richer model, where managers balance short-term and long-term incentives, we identify a situation where less concentration might imply less disclosure. We argue that other dimensions of competition might have a stronger effect on disclosure choices. In particular, we predict that competitive environments with ongoing entry feature less disclosure relative to environments in which the number of firms is stable.