Disclosure, Real Investment and Capital Rationing in Equity Markets

• DOI: 10.2139/ssrn.4044719
• Publication Date: 2022-03-29T03:15:41Z
• Authors: Jeroen Suijs; Li Yang
• Keywords: Equity; Investment

This paper shows that higher transparency in equity markets increases firms’ real investment productive activities, but may also result capital rationing by investors. When multiple firms compete for and an investor allocates on the basis of disclosures, a disclosure tournament results increase their actions enhance outcomes. We show such can over-investment investors limit reducing amount they make available to firms. Consequently, reduce access capital.