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Using a novel pairwise measure of firms' acquisition of rivals' disclosures, we show that investment opportunities drive interfirm information flows. We find that these flows predict subsequent mergers and acquisitions as well as how and how much firms invest, relative to rivals. Moreover, firms' use of rivals' information often hinges on the similarities of their products. Our results suggest that rivals' public information, far from being unusable, helps facilitate investment and product decisions, including acquisitions and product differentiation strategies. The findings also support a learning mechanism that could partly underlie the emerging literature on peer investment effects.

We examine size management by European private firms for which disclosure requirements increase at size thresholds. Our estimates suggest at least 8% of firms near thresholds that impose income statement disclosure manage size downward, and the average firm that manages size sacrifices more than 6% of its assets. We find that multiple determinants of proprietary costs predict this behavior, and that size management to avoid mandatory audits, which are similarly imposed at size thresholds, is of comparable magnitude. Our results triangulate the economic significance of proprietary costs in a setting largely without confounding capital market, agency, or compliance costs.

We present evidence that although individuals with accounting expertise bring key skills to the financial reporting responsibilities of the chief financial officer (CFO) position, they tend to lack educational and career experiences relevant to nonaccounting responsibilities (e.g., operations and strategy). Assuming boards’ perceptions of CFO accounting expertise are correct on average, we provide evidence of tradeoffs of CFO accounting expertise by examining how differences in CFO backgrounds shape executive employment decisions. Firms with greater demand for nonaccounting expertise are less likely to hire an accounting expert CFO, consistent with ex ante firm-manager matching. Ex post, significant declines in firm-manager fit predict CFO turnover and other compensating changes in the composition of the senior management team. Accounting expert CFOs are also less likely to become chief executive officers, suggesting that CFO experience does not fully mitigate these tradeoffs. Collectively, the results suggest important tradeoffs inherent to CFO accounting expertise that shape the structure of the senior management team. This paper was accepted by Suraj Srinivasan, accounting.

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for their helpful comments and suggestions. The authors also thank Ed deHaan, Harry Evans, Gale Gold Nichols, and Jamie Pratt for their help in facilitating the experiment, Conor Brown for research assistance, and Starbucks Corporation for access to data. Frank Hodge acknowledges financial support of the Michael G. Foster Endowed Professorship. Darren Bernard acknowledges financial support of the London Business School. † Our report was originally titled, "Investor Behavior and the Benefits of Dispersed Stock Ownership." We adjusted the title because our analyses examine the benefits of direct individual ownership and not ownership dispersion per se.