The Impacts of Product Market Competition on the Quantity and Quality of Voluntary Disclosures

Abstract:     
This study examines how firms' voluntary disclosure decisions are influenced by product market competition. Using separate measures to capture different dimensions of competition, I show that competition from potential entrants increases disclosure quantity while competition from existing rivals decreases disclosure quantity. I also find that competition enhances disclosure quality mainly through reducing the optimism in profit forecasts and reducing the pessimism in investment forecasts. Moreover, I find that the above association is less pronounced for industry leaders, consistent with industry leaders facing less competitive pressures than industry followers.

Keywords: Product market, Potential competition, Existing competition, Profits, Investments, Management forecasts

JEL Classification: D4, D80, L1, M40, M41

Accepted Paper Series