Economic consequences of the declining relevance of financial reports

The proliferation of alternative information sources has reduced the releva nce of corporate annual reports. This paper examines economic Outcomes in a n oligopolistic industry as investors become better informed but financial reports convey a smaller portion of the total information. Results show tha t an increase in alternate sources of information, and the resulting declin e in relevance of financial reports, leads to a loss in economic efficiency despite the presence of additional information. Investors benefit, but at the expense of consumers and social welfare. Investors benefit not necessar ily because the amount of information in the economy increases, but because there is a change in the channels through which the same information is co mmunicated.