A PYMNTS Company

Cartel Participation and Voluntary Disclosure

 |  June 15, 2017

Posted by Social Science Research Network

Cartel Participation and Voluntary Disclosure

By Ashiq Ali, Ningzhong Li, Xiaolu Zhou (University of Texas at Dallas) & Ailin Dong (Hong Kong University of Science & Technology)

Abstract:     This study examines the impact of a firm’s cartel participation on its voluntary disclosure. We find that firms reduce voluntary disclosure during their cartel participation period relative to their non-participation period, and that this effect is more pronounced when cartels face higher risk of detection by regulators, face greater penalty if detected, and when firms have stronger incentives to cheat other cartel members. These results suggest that upon joining a cartel, a firm has the incentive to become more opaque to reduce the likelihood of detection by regulators of its cartel participation and of detection by other cartel members of any cheating it may engage in.