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shocks, best operating practices, governance arrangements, etc. This information can be useful to other firms for decision making but it can also help reduce agency problems in other firms. Firms‟ disclosures of operating performance and governance arrangements provide useful benchmarks that help outside investors to evaluate other firms‟ managerial efficiency or potential agency conflicts and in doing so lower the cost of monitoring. While the incremental contribution of each firm‟s disclosure is likely to be small, these information transfers could carry substantial benefits for the market or the economy as a whole. The real effects of information transfers and potential governance spillover effects are still largely unexplored. Most of the work has focused on information transfers in capital markets, starting with Foster (1981). Dye (1990) and Admati and Pfleiderer (2000) analyze positive externalities in the form of information transfers and liquidity spillovers in capital markets. As firm values and cash flows are likely to be correlated, the disclosure of one firm is useful to investors in valuing other firms and increases the investors‟ demand for shares in other firms. Lambert et al. (2007a) show that this argument applies to estimation risk. Each firm‟s disclosure has a (small) impact on investors‟ assessed covariances of other firms, which in turn lowers the estimation risk and cost of capital of other firms. Jorgensen and Kirschenheiter (2007) show similar externalities in the context of disclosures about firms‟ sensitivity to a market-wide risk factor. Again, while these effects are likely to be small individually, they could be large across all firms in the market or economy. There is also the argument that firm-specific disclosures have market-wide benefits because they eliminate duplicative efforts of information intermediaries and investors and that firms are likely the lowest-cost producer for corporate information (e.g., Coffee, 1984; Easterbrook and Fischel, 1984; Diamond, 1985).13 At the same time, there can be negative effects or costly externalities to firms‟ reporting and misreporting activities. For example, Fishman and Hagerty (1989) show that an increase in disclosure by one firm can attract investors away from other firms (e.g., if processing information is costly). In markets that are not perfectly competitive, this effect lowers the price efficiency of other firms and creates a negative externality. This argument can be extended to apply across markets or countries. If markets that are not perfectly competitive, then high transparency in one capital market can siphon off investors and lower the price efficiency in other capital markets. In addition, a firm‟s disclosures can have effects on the efficiency of risk sharing in a market. Adverse selection can distort market-wide risk sharing because investors with relatively high risk tolerance will hold smaller positions (i.e., bear less risk) than they would otherwise because they anticipate the costs of liquidating larger positions in a market with information asymmetry among traders. This effect leaves more risk to be borne by less risk tolerant investors, leading to a higher market risk premium. Diamond and Verrecchia (1991) illustrate this point in a model with risk-neutral and risk-averse traders, but it also applies to economies with differentially risk averse investors (see also Lambert, Leuz and Verr本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。