The race toward transparency: an experimental investigation

To understand the current tendency toward transparency, we studied the effects of account disclosure in a laboratory. In our experiment, transparency in the financial accounts of listed companies improved information efficiency; but, even after checking for fundamentals, the transparency increased the volatility of market prices. Moreover, transparency improved investors' utility, so that their prefence for more certain assets emerged. Therefore, we argue that the current race toward transparency may be better explained by firms' and markets' intention to attract household investment rather than to improve market efficiency.