Melbourne Accounting Research Seminar - Davide Cianciaruso
Assistant Professor Davide Cianciaruso from HEC Paris will present a MARS seminar.
Topic: Disclosure Quality with Concentrated Ownership: Dynamic Risk Sharing and Cost of Capital
Abstract: We study the e ffects of disclosure in a dynamic market with imperfect competition, where the supply of an asset is determined by a large shareholder who trades to diversify away from concentrated ownership. Small investors provide capital and thus risk-bearing capacity to the market. While it is well-known that disclosure impedes risk sharing by shifting risk before future trading opportunities, we show that disclosure, at the same time, can actually enhance risk sharing by promoting more trades. Resolving
this trade-o , an interior level of disclosure precision maximizes the small investors' surplus as well as the total surplus, but minimizes the large shareholder's surplus. Although the disclosure policies that minimize the ex ante cost of capital (i.e., no-disclosure and full disclosure) also maximize the large shareholder's payo ff, they are not efficient as they provide the lowest return to the small investors.
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