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I examine the effects of proprietary information on corporate transparency and voluntary disclosure. To do so, I develop and validate two measures of firms' reliance on trade secrecy: one based on 10-K disclosures and one based on subsequent litigation outcomes. I complement these measures by using the staggered passage of the Uniform Trade Secrets Act as a shock to trade secrecy. I find that firms that begin to rely more heavily on trade secrecy substitute increased voluntary disclosure of nonproprietary information for decreased disclosure of proprietary information. The total effect of trade secrecy is a decrease in corporate transparency.
I examine the effects of proprietary information on corporate transparency and voluntary disclosure. To do so, I develop and validate two measures of firms' reliance on trade secrecy: one based on 10-K disclosures and one based on subsequent litigation outcomes. I complement these measures by using the staggered passage of the Uniform Trade Secrets Act as a shock to trade secrecy. I find that firms that begin to rely more heavily on trade secrecy substitute increased voluntary disclosure of nonproprietary information for decreased disclosure of proprietary information. The total effect of trade secrecy is a decrease in corporate transparency.
study how increased market transparency affects firms' disclosure incentives. I exploit the staggered introduction of TRACE, which made bond prices and transactions publicly observable, and show firms provide more guidance when their bonds' prices and trading become observable. This effect is stronger for firms with informationally sensitive bonds and firms without exchange-listed bonds prior to TRACE. Also, firms become particularly more likely to disclose bad news, consistent with the notion that investors' access to market information limits managers' incentives to withhold information. I corroborate my results using a small controlled experiment, in which prices and trading are revealed for a randomized set of bonds. Taken together, my results suggest that observable market outcomes inform investors not only directly by aggregating and revealing investors' information and beliefs, but also indirectly by increasing corporate disclosure.
The Regulation of Corporate Disclosure, Third Edition is a complete and up-to-date handbook on the issue of corporate disclosure, covering the impact of the federal securities laws on both informal communications and the process of communicating with shareholders. The Third Edition expands topics previously covered, addressing the legal issues and practical concerns surrounding implementation of the Private Securities Litigation Reform Act of 1995, the Sarbanes-Oxley Act of 2002, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The book also has an in-depth treatment of managementand’s discussion and analysis (MDand&A), something that, although appearing in required SEC filings, involves many of the same difficult and complex issues raised by the informal disclosure process. Also addressed are: SEC reforms of the periodic reporting process; issues pertaining to stock research analysts and conflicts of interest; and various relevant corporate governance requirements and their disclosure implications. Critical areas analyzed include ;Disclosure requirements and anti-fraud provisions The duty to disclose Dissemination Issues involving materiality Disclosure of bad news Negotiations Dealing with analysts And much more!
We evaluate two competing views - the proprietary costs theory and the entry deterrence theory - in explaining the relationship between entry threats and firms' disclosure. We examine if entry threats from technology startups influence firms' information disclosure in the high-tech sector, where significant turbulence emerges from new ventures. Leveraging a new measure of new entry threats (NET) based on text mining of publicly available information, we show that a higher level of NET faced by incumbent firms are associated with a decrease in the transparency of its information disclosure, measured by two indicators: a disclosure index derived from analyst forecasts, and confidential treatment orders filed by firms. Our results support the proprietary cost theory of disclosure. Interestingly, we find this effect to be more pronounced in sectors where proprietary information is vulnerable to misappropriation, and in industries associated with higher worker mobility. We discuss implications for research and insights for practitioners.
This study exploits the staggered adoption of the inevitable disclosure doctrine (IDD) by U.S. state courts as an exogenous shock that generates variations in the proprietary costs of disclosure. We find that firms respond to IDD adoption by reducing the level of disclosure regarding their customers' identities, supporting the proprietary cost hypothesis. Our results are stronger for firms in industries with a higher degree of entry threats, for firms in more volatile industries, and for firms with a lower degree of external financing dependence. Overall, this study represents one of the first efforts in identifying the causal effect of proprietary costs of disclosure on the supply of disclosure.
This study examines the impact of digital transformation on the quality of corporate information disclosure. Employing panel-data analysis of A-share listed companies, we empirically test our hypothesis and find that digital transformation significantly improves the quality of information disclosure that remain robust after controlling for variable substitution measurement, variable sensitivity analysis, and PSM+DID. Moreover, our study indicates that the effects of different digital technologies on information disclosure quality vary. We also examine the moderating role of internal and external factors, and our results suggest that market competition and corporate governance enhance the positive impact of digital transformation. Our mechanism testing reveals that digital transformation enhances the quality of information disclosure by mitigating information asymmetry and agency problems and enhancing resource efficiency. Our research contributes to the empirical literature on the economic implications of digital transformation and offers meaningful implications for enhancing the quality of enterprise information disclosure.