Copycat Skills and Disclosure Costs: Evidence from Peer Companies’ Digital Footprints

We examine whether firms that imitate peer companies’ strategies (copycats) profit from such behavior and how their success may cause competitive harm to disclosing companies. We identify copycat companies by tracking the digital footprints of investment companies that view disclosures on the SEC EDGAR website. We find that copycat companies are able to identify profitable trades that outperform other trades disclosed by the copycatted companies by 5.5% annually. Such stock-screening skills are related to investment sophistication and research intensity. Furthermore, copycats inflict greater damage on the performance of disclosing companies when they possess superior copycat skills, when disclosed trading strategies take longer to complete, and when disclosed stock holdings are characterized by high information asymmetry.

Keywords: Copycat, Disclosure, SEC EDGAR, Hedge Fund, Investment Company, Investment Research, Proprietary Cost, Big Data

JEL Classification: G11, G14, G23

Suggested Citation: Suggested Citation

Cao, Sean S. and Du, Kai and Yang, Baozhong and Zhang, Alan L., Copycat Skills and Disclosure Costs: Evidence from Peer Companies’ Digital Footprints (April 30, 2021). Journal of Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3280744 or http://dx.doi.org/10.2139/ssrn.3280744