Proprietary Costs and the Disclosure of Information About Customers

54 Pages Posted: 15 Sep 2010

See all articles by Jesse A. Ellis

Jesse A. Ellis

North Carolina State University

C. Edward Fee

Tulane University - A.B. Freeman School of Business

Shawn Thomas

University of Pittsburgh - Katz Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2010

Abstract

In deciding how much information about customers to disclose, firms face a trade-off between the benefits of reducing information asymmetry with capital market participants and the costs of aiding competitors by revealing proprietary information. This paper investigates the determinants of firms’ choices to disclose information about their customers using a comprehensive dataset of firms’ customer-information disclosures over the period 1976-2006. We find that firms facing greater proprietary costs are significantly less likely to voluntarily reveal information about their customers and are significantly more likely to make less informative mandatory disclosures about their customers. These findings offer support for the hypothesis that proprietary costs are an important factor in disclosure choice. We also find that firms significantly increase their voluntary disclosures of customer information in the years immediately prior to conducting seasoned equity offerings consistent with the hypothesis that capital market concerns are also an important factor in disclosure choice.

Keywords: Proprietary Costs, Disclosure, Customers, Competition

JEL Classification: M41, L14

Suggested Citation

Ellis, Jesse A. and Fee, C. Edward and Thomas, Shawn, Proprietary Costs and the Disclosure of Information About Customers (September 1, 2010). Available at SSRN: https://ssrn.com/abstract=1676982 or http://dx.doi.org/10.2139/ssrn.1676982

Jesse A. Ellis

North Carolina State University ( email )

Poole College of Management
Campus Box 7229
Raleigh, NC 27695
United States
919-515-9670 (Phone)

C. Edward Fee (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Shawn Thomas

University of Pittsburgh - Katz Graduate School of Business ( email )

246 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-1648 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~shthomas/index.htm

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