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
Date Written: December 3, 2014
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: Suggested Citation