How does private firm disclosure affect demand for public firm equity? Evidence from the global equity market

Jahr: 2022
Typ: Journal Publication
Fachzeitschrift: Journal of Accounting and Economics
Open Science:


We investigate the relationship between private firms‘ disclosures and the demand for the equity of their publicly traded peers. Using data on the global movement of portfolio investments in public equity, we find that a 10% increase in private firm disclosure transparency – proxied by the number of disclosed private firms‘ financial statement line items – reduces global investors’ demand for public equity by 4.3% or $358 million per investee country-industry. These findings are consistent with private firm disclosures generating negative pecuniary externalities – global investors reallocate their capital away from public firms to more transparent private firms – and less consistent with these disclosures creating positive information externalities that would benefit public firms. Consistent with this interpretation, we find that the reduction in demand for public equity is offset by a comparable increase in capital allocation to more transparent private firms. Using a simulated instruments approach and the staggered implementations of electronic business registers in investee countries in Europe as plausibly exogenous shocks to private firm transparency, we conclude that the negative relationship between private firm disclosures and public equity demand is likely causal.

Beteiligte Institutionen

Die Hauptstandorte vom TRR 266 sind die Universität Paderborn (Sprecherhochschule), die HU Berlin und die Universität Mannheim. Alle drei Standorte sind seit vielen Jahren Zentren für Rechnungswesen- und Steuerforschung. Hinzu kommen Wissenschaftler der LMU München, der Frankfurt School of Finance and Management, der Goethe-Universität Frankfurt, der Universität zu Köln und der Leibniz Universität Hannover, die die gleiche Forschungsagenda verfolgen.