Technological Peer Pressure and Product Disclosure

62 Pages Posted: 5 Mar 2016 Last revised: 29 Jul 2019

See all articles by Sean Cao

Sean Cao

Georgia State University - J. Mack Robinson College of Business

Guang Ma

National University of Singapore

Jenny Wu Tucker

University of Florida - Warrington College of Business Administration

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance

Date Written: January 30, 2017

Abstract

The relation between product-market competition and voluntary corporate disclosure is fundamental, but empirical evidence of this relation has been mixed. One reason for the mixed evidence could be that both competition and disclosure are multidimensional. In this study we introduce a firm-specific measure of the technological aspect of competition—technological peer pressure—to the accounting literature and examine an overlooked type of voluntary disclosure—firm-initiated product-development-related press releases (“product disclosure”). We argue that empirical examinations of the theorized negative relation between competition and disclosure require the type of voluntary disclosure to be relevant to the dimension of competition under examination to ensure that firms incur significant proprietary costs of disclosure. We expect a negative relation between technological peer pressure and product disclosure because the latter reveals firms’ strategies, allocations, and progress of technological investments in product development to competitors. In contrast, we do not expect a negative relation between technological peer pressure and management earnings forecasts—the most common type of voluntary disclosure used in accounting research—because earnings projections reveal little about technological investments. Our test results are consistent with these expectations. Our study highlights the importance of understanding the multidimensionality of product-market competition and voluntary disclosure.

Keywords: competition, proprietary costs, voluntary disclosure, technology

JEL Classification: M4

Suggested Citation

Cao, Sean S. and Ma, Guang and Tucker, Jenny Wu and Wan, Chi, Technological Peer Pressure and Product Disclosure (January 30, 2017). The Accounting Review, November 2018, 93 (6): 95-126. Available at SSRN: https://ssrn.com/abstract=2741991 or http://dx.doi.org/10.2139/ssrn.2741991

Sean S. Cao

Georgia State University - J. Mack Robinson College of Business ( email )

P.O. Box 4050
Atlanta, GA 30303-3083
United States

Guang Ma

National University of Singapore ( email )

15 Kent Ridge Drive
Mochtar Riady Building
Singapore, 119245
Singapore
+65-66012838 (Phone)

Jenny Wu Tucker (Contact Author)

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States
352-273-0214 (Phone)
352-392-7962 (Fax)

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance ( email )

Boston, MA 02125
United States

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