Redact to Protect? Customers’ Incentive to Protect Information and Suppliers’ Disclosure Strategies

62 Pages Posted: 27 Jun 2018 Last revised: 18 Jan 2022

See all articles by Gary Chen

Gary Chen

DePaul University

Xiaoli (Shaolee) Tian

Georgetown University - Department of Accounting and Business Law

Miaomiao Yu

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration

Date Written: February 1, 2019

Abstract

We find that suppliers are more likely to redact mandated disclosures when major customers have proprietary information to protect (in the form of R&D intensity, trade secrets, and nondisclosure agreements), controlling for suppliers’ own proprietary cost concerns. Furthermore, the effect on suppliers’ redactions is concentrated in subsamples for which customers have greater power, measured by customer size, industry leadership, and the number of suppliers. Additionally, suppliers also curtail operations-related disclosures in the management discussion and analysis (MD&A) and product- and service-related press releases when customers likely have proprietary information to protect. Overall, these findings suggest that dependent suppliers internalize their customers’ disclosure incentives and curtail disclosures, catering to customers’ demand for information protection.

Keywords: Supply Chain, Customer, Supplier, Disclosure

JEL Classification: G14, G30, M41, D23

Suggested Citation

Chen, Gary and Tian, Xiaoli (Shaolee) and Yu, Miaomiao, Redact to Protect? Customers’ Incentive to Protect Information and Suppliers’ Disclosure Strategies (February 1, 2019). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3195014 or http://dx.doi.org/10.2139/ssrn.3195014

Gary Chen

DePaul University ( email )

1 East Jackson Blvd.
Chicago, IL 60604
United States

Xiaoli (Shaolee) Tian (Contact Author)

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Washington, DC 20057
United States

Miaomiao Yu

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration ( email )

LA 70803-6308
United States

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