Incentive

Quantum mechanics

Statistics

Microeconomics

Accounting

Economics

Market economy

Market liquidity

Business

Natural experiment

Physics

Mathematics

Monetary economics

Externality

Common ownership

Voluntary disclosure

Finance

Causality (physics)

Journal of Accounting and Economics

This paper examines whether common ownership – i.e., instances where investors simultaneously own significant stakes in competing firms – affects voluntary disclosure. We argue that common ownership (i) reduces proprietary cost concerns of disclosure, and (ii) incentivizes firms to “internalize” the externality benefits of their disclosure for co-owned peer firms. Accordingly, we find a positive relation between common ownership and disclosure. Evidence from cross-sectional tests and a quasi-natural experiment based on financial institution mergers help mitigate concerns that our results are explained by an omitted variable bias or reverse causality. Finally, we find that common ownership is associated with increased market liquidity.

Disclosure incentives when competing firms have common ownership