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Competitive Disadvantage and Discretionary Disclosure in Industries
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Greg Clinch and Robert E. Verrecchia
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Abstract
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We explore how competitive disadvantage affects firms' incentives to disclose or
withhold information of common interest to competing firms within a Cournot
duopoly. We establish the existence of a unique disclosure equilibrium to
the problem of firms disclosing private information about aggregate demand, and
show that firms choose to withhold information of either very high or very low
demand. We also show that both the size of the disclosure interval and ex ante
probability of disclosure decreases as the intensity of competition between
firms increases.
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Keywords
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COMPETITIVE DISADVANTAGE; DISCRETIONARY DISCLOSURE; DISCLOSURE REGULATION.
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Contact Details
Greg Clinch
Australian Graduate School of Management
The University of New South Wales
Sydney NSW 2052
Email: gregc@agsm.unsw.edu.au
Robert E. Verrecchia
Wharton School
University of Pennsylvania
Philadelphia PA 19104
USA
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