Entry and Capital Structure Mimicking in Concentrated Markets: the Role of Incumbents' Financial Disclosures

56 Pages Posted: 11 Nov 2018 Last revised: 12 Nov 2020

See all articles by Darren Bernard

Darren Bernard

University of Washington - Department of Accounting

Devrimi Kaya

Ruhr University of Bochum

John Wertz

University of Washington - Michael G. Foster School of Business

Date Written: November 11, 2020

Abstract

We examine whether the public availability of product market incumbents’ financial disclosures leads to greater capital structure mimicking of incumbents by entrants. Exploiting a change in disclosure enforcement for German private firms in the mid-2000s, we find entrant-incumbent mimicking rises substantially in concentrated markets once incumbents’ financial statements are publicly available. Additional tests exploring potential mechanisms are more consistent with interfirm learning underlying the effect than alternative channels. Our findings shed light on the effects of competitor financial statement disclosure on private firms’ initial financing decisions and highlight how capital structure dependencies among peer firms arise.

Keywords: public disclosure, capital structure, private firms, mimicking

JEL Classification: G32, M41

Suggested Citation

Bernard, Darren and Kaya, Devrimi and Wertz, John, Entry and Capital Structure Mimicking in Concentrated Markets: the Role of Incumbents' Financial Disclosures (November 11, 2020). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3269184 or http://dx.doi.org/10.2139/ssrn.3269184

Darren Bernard (Contact Author)

University of Washington - Department of Accounting ( email )

PACCAR Hall
4273 E Stevens Way NE
Seattle, WA 98195-3200
United States

Devrimi Kaya

Ruhr University of Bochum ( email )

Faculty of Management and Economics
Bochum, 44801
Germany

John Wertz

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

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