Groups and information disclosure: evidence on the Olson and Putnam hypotheses in Japan

Purpose – There is controversy between Putnam and Olson concerning the role of groups. Putnam argued that small groups contribute to economic growth, whereas Olson asserted that small groups hamper economic growth through rent‐seeking behavior. Since the end of the 1990s in Japan, there has been a remarkable rise in the rate of enactment of public information‐disclosure ordinances by local governments. This paper aims to use the panel data of Japan to compare the effects of Putnam‐type horizontally structured groups and Olson‐type vertically structured groups on government information disclosures. Design/methodology/approach – The Arellano‐Bond type dynamic panel model is employed to control for unobserved fixed effects and endogeneity bias. Findings – The major findings are as follows: the Putnam‐type group has a positive influence on information disclosure; and the Olson‐type group has a detrimental effect on information disclosure. Originality/value – These findings support both the Putnam and Olson hypotheses. The characteristics of a particular group should be considered carefully when the influence of that group is examined.