Working Paper: NBER ID: w17664
Authors: Augustin Landier; David Thesmar
Abstract: Public or partial disclosure of financial data is a key element in the design of a new regulatory environment. We study the costs and benefits of higher public access to financial data and analyze qualitatively how frequency, disclosure lag and granularity of such open data can be chosen to maximize welfare, depending on the relative magnitude of economic frictions. We lay out a simple framework to choose optimal transparency of financial data.
Keywords: transparency; systemic risk; financial data; regulation
JEL Codes: D82; D83; H41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher public access to financial data (G28) | enhance individual decision-making (D91) |
| higher public access to financial data (G28) | improve market efficiency (G14) |
| full public disclosure is desirable for welfare (D69) | in a frictionless economy (P19) |
| increased transparency (G38) | reduce welfare (I38) |
| increased transparency (G38) | create adverse selection and coordination failures (D82) |
| too much transparency (D73) | decreased market efficiency (G14) |
| transparency (G38) | predatory trading (G18) |
| predatory trading (G18) | exploit distressed investors (G24) |
| public disclosure (G38) | generate perverse incentives for financial institutions (G21) |
| perverse incentives for financial institutions (G21) | manipulate disclosures (G34) |
| manipulate disclosures (G34) | distort market signals (D49) |