Entry and Capital Structure Mimicking in Concentrated Markets: the Role of Incumbents' Financial Disclosures

Bernard, Darren; Kaya, Devrimi; Wertz, John E.

doi:10.2139/ssrn.3269184

Cited by 6 publications

(6 citation statements)

References 27 publications

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“…Consistent with this redistribution of innovative activity, we find that reporting mandates reduce innovation activities of mandated firms, while they spur innovation activities of other firms, especially larger customers, suppliers, and competitors. The latter finding is broadly consistent with the literature on information spillovers from mandatory reporting of public firms on private firms' investments and business formation (e.g., Badertscher et al 2013;Barrios et al 2020;Bernard et al 2020).…”

Section: Introductionsupporting

confidence: 89%

Mandated Financial Reporting and Corporate Innovation

2019

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We investigate the impact of reporting regulation on corporate innovation. Exploiting thresholds in Europe's regulation and a major enforcement reform in Germany, we find that forcing firms to publicly disclose their financial statements discourages innovative activities. Our evidence suggests that reporting regulation has significant real effects by imposing proprietary costs on innovative firms, which in turn diminish their incentives to innovate. At the industry level, positive information spillovers (e.g., to competitors, suppliers, and customers) appear insufficient to compensate the negative direct effect on the prevalence of innovative activity. The spillovers instead appear to concentrate innovation among a few large firms in a given industry. Thus, financial reporting regulation has important aggregate and distributional effects on corporate innovation.

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Section: Introductionsupporting

confidence: 89%

Mandated Financial Reporting and Corporate Innovation

2019

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“…The finding that firms' mandatory reporting benefits other firms is consistent with a growing literature documenting information spillovers (e.g.,Badertscher et al 2013;Bernard et al 2020;Glaeser & Omartian 2022).…”

mentioning

confidence: 99%

Reporting Regulation and Corporate Innovation

Breuer¹,

Leuz²,

Vanhaverbeke³

2019

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“…23 23 This is the most common method of identifying support for the validity of the parallel trends assumption in the accounting literature (Armstrong et al 2019; Balakrishnan et al 2019; Christensen et al 2017; Christensen et al 2020; Dey and White 2021; Park et al 2019; Samuels 2021). In untabulated analyses, I draw similar support for the validity of the parallel trends assumption using other commonly used methods including: (i) illustrating parallel trends in mean raw values of the outcome variable for treatment and control firms from t – n to t + n (Bernard et al 2021; Blouin et al 2021; DeFond et al 2020; Lennox et al 2018), or t – n to t (Gipper 2021; Chapman 2018; Harris and O'Brien 2018; Iselin and Nicoletti 2017); (ii) replicating the primary analyses using placebo treatment event years (DeFond et al 2020; Ferri et al 2018; Kyung et al 2019; Lamoreaux 2016); and (iii) documenting covariate balance (as I do in panel C of Table 5; Armstrong et al 2019; Kauser et al 2016; Mehta and Zhao 2020). …”

mentioning

confidence: 66%

Financial Reporting Consequences of Sovereign Wealth Fund Investment*

Godsell

2022

Contemporary Accting Res

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Sovereign wealth funds (SWFs) are government‐owned institutional investors pursuing political and financial investment objectives. With $8 trillion in assets, SWFs are geopolitical powerbrokers actively participating in global capital markets, yet we know little about the financial reporting consequences of SWF investment. I document evidence supporting the hypothesis that the simultaneous pursuit of political and financial investment objectives renders SWFs weak monitors. Using a staggered difference‐in‐differences research design, I document economically significant increases in discretionary accruals for SWF target firms after SWF investment, relative to an entropy‐balanced control group of non‐SWF target firms. Corroborating tests document that the effect of SWF investment on discretionary accruals strengthens with SWFs' equity stake and SWF target firms' earnings management incentives and weakens when regulators curb SWFs' pursuit of political objectives. I highlight SWFs' distinct monitoring effect by replicating my analyses after replacing SWF investment with conventional institutional investment, and document that conventional institutional investment instead reduces discretionary accruals. I further corroborate SWFs' distinct monitoring role among conventional institutional investors using a wide variety of robustness tests employing alternate specifications, samples, and financial reporting proxies. Overall, this study introduces an economically important and fundamentally distinct but little‐studied institutional investor to the accounting literature.

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Entry and Capital Structure Mimicking in Concentrated Markets: the Role of Incumbents' Financial Disclosures

Cited by 6 publications

References 27 publications

Mandated Financial Reporting and Corporate Innovation

Mandated Financial Reporting and Corporate Innovation

Reporting Regulation and Corporate Innovation

Financial Reporting Consequences of Sovereign Wealth Fund Investment*

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