Trade Secrets Law and Corporate Disclosure: Causal Evidence on the Proprietary Cost Hypothesis

78 Pages Posted: 28 Aug 2017 Last revised: 14 Nov 2017

See all articles by Yinghua Li

Yinghua Li

Arizona State University (ASU) - School of Accountancy

Yupeng Lin

National University of Singapore

Liandong Zhang

Singapore Management University - School of Accountancy

Multiple version iconThere are 2 versions of this paper

Date Written: 2017

Abstract

This study exploits the staggered adoption of the inevitable disclosure doctrine (IDD) by U.S. state courts as an exogenous shock that generates variations in the proprietary costs of disclosure. We find that firms respond to IDD adoption by reducing the level of disclosure regarding their customers’ identities, supporting the proprietary cost hypothesis. Our results are stronger for firms in industries with a higher degree of entry threats, for firms in more volatile industries, and for firms with a lower degree of external financing dependence. Overall, this study represents one of the first efforts in identifying the causal effect of proprietary costs of disclosure on the supply of disclosure.

Keywords: Proprietary Costs, Corporate Disclosure, Customer Identity, Inevitable Disclosure Doctrine, Trade Secrets Law

JEL Classification: D82, D83, K11, L1, M41

Suggested Citation

Li, Yinghua and Lin, Yupeng and Zhang, Liandong, Trade Secrets Law and Corporate Disclosure: Causal Evidence on the Proprietary Cost Hypothesis (2017). Journal of Accounting Research, Forthcoming; Singapore Management University School of Accountancy Research Paper No. 2017-70. Available at SSRN: https://ssrn.com/abstract=3025877

Yinghua Li (Contact Author)

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States
480-965-5188 (Phone)

HOME PAGE: http://wpcarey.asu.edu/people/profile/2386522

Yupeng Lin

National University of Singapore ( email )

15 Kent ridge drive
Singapore
Singapore

HOME PAGE: http://sites.google.com/site/scottlinyupeng/

Liandong Zhang

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

HOME PAGE: http://accountancy.smu.edu.sg/faculty/profile/150531/Liandong-ZHANG

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