Disclosure and Dynamic Risk Sharing with a Large Shareholder
Cianciaruso, Davide, Qiu, Lin, Xue, Wenjie
The Accounting Review · 2025 · Volume 100 · Issue 1
Abstract
We study the effects of disclosure in a dynamic market with imperfect competition. The supply of an asset is determined by a large shareholder with price impact, who trades slowly to diversify away from concentrated ownership. Small investors provide capital and thus risk-bearing capacity to the market. Although 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 enhance risk sharing by promoting more trades. Resolving this tradeoff, an interior level of disclosure quality maximizes the small investors’ surplus as well as the total surplus, but minimizes the large shareholder’s surplus. Further, efficient disclosure policies feature increasing quality over time. JEL Classifications:D80; E21; G12; L13; M41.
Keywords
blockholder, dynamic trading, periodic reporting, price impact, public information, public offering, welfare
Enable JavaScript for citation tools and additional paper interactions.