The Spillover Effects of MD&A Disclosures for Real Investment: The Role of Product Market Competition

48 Pages Posted: 14 Jan 2012 Last revised: 21 Feb 2015

See all articles by Art Durnev

Art Durnev

University of Iowa - Henry B. Tippie College of Business

Claudine Mangen

Concordia University, Montreal - John Molson School of Business

Date Written: December 3, 2014

Abstract

We explore the association between a company’s investments and the tone of its peers’ MD&A disclosures; we ask whether the direction and the strength of this association is affected by product market competition. We find that the direction of the association can differ according to whether investing companies and disclosing peers in a product market have positive or negative interdependencies. Moreover, we document that the strength of the association between a company’s investments and the tone of its peers’ MD&A disclosures varies with product market fundamentals: the association is stronger when entry costs are lower, the product market is larger and products are less substitutable. Finally, we show that our results regarding investments generally carry over to investment efficiency.

Keywords: qualitative disclosures, MD&A, investments

JEL Classification: M41, D83, G31

Suggested Citation

Durnev, Artyom and Mangen, Claudine, The Spillover Effects of MD&A Disclosures for Real Investment: The Role of Product Market Competition (December 3, 2014). CAAA Annual Conference 2012. Available at SSRN: https://ssrn.com/abstract=1984956 or http://dx.doi.org/10.2139/ssrn.1984956

Artyom Durnev

University of Iowa - Henry B. Tippie College of Business ( email )

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Claudine Mangen (Contact Author)

Concordia University, Montreal - John Molson School of Business ( email )

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HOME PAGE: http://claudinemangen.com/

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