Using disclosure to influence herd behavior and alter competition

When establishing disclosure policies, firms carefully weigh the ramifications for various constituents. This paper stresses such multi-faceted judgments by addressing the joint effect of information disclosure on competitors and third-party information providers. While the desire to keep competitors out-of-the-loop may point to a firm keeping proprietary information away from the public eye, the presence of other information providers (e.g., analysts and media outlets) can play a key role. In particular, a firm may benefit from public disclosure because it serves to guide the information gathering and dissemination of third parties. Though the direct effect of disclosure is to unduly arm competitors with information, the reverberations that come in the form of directing the herd of information providers may make it worthwhile.