Abstract:*

This study examines how private firms’ disclosure creates information externalities for public firms’ information environment. Exploiting a setting with varying importance of private firms and availability of their information, we document lower analyst forecast accuracy when private peer importance in the respective industry is higher. Further, holding the importance constant and varying the availability of private peers’ information reveals that these effects are driven by opaque private peers. A cross-sectional test indicates that these externalities primarily manifest when the availability of information about public firms is relatively poor. Finally, a difference-in-differences analysis shows increased forecast activity around private peers’ disclosure dates, indicating causality. Overall, our findings support a cost-argument explaining the negative relation between analysts’ information acquisition and processing costs and the availability of private firms’ disclosure, contributing to the regulatory debate about disclosure requirements for private firms.

*Co-authored with V. Flagmeier (Universität Passau).

General information:

Attendance to this seminar is possible by invitation only. Please send an e-mail to secbs-abs@uva.nl if your are interested in attending this seminar.