Regulatory Approval and Biotechnology Product Disclosures.
57 Pages Posted: 3 Dec 2018 Last revised: 8 Oct 2021
Date Written: October 7, 2021
This paper examines the effect of regulatory approval on a firm's voluntary product-level disclosures. We focus on the US biotechnology industry, a setting which allows direct observation of whether firms disclose more information as products proceed through well-defined—though successively more complex and costly—regulatory hurdles. Consistent with predictions motivated by biotech firms’ need to repeatedly raise capital, we find that firms disclose more as their products move to later stages in the development process, both when the products receive regulatory approvals, as well as when they receive regulatory denials. In addition, these findings are consistent across phases of development as well as product disclosure categories, and accentuated for firms without internal sources of capital (i.e., lacking product revenue). Collectively, these findings reveal that biotechnology firms respond to the considerable incentives to provide enhanced product disclosure, and thus facilitate their ongoing need for capital to proceed through subsequent stages of product development.
Keywords: voluntary disclosure, product disclosure, regulatory approval, biotech industry, FDA
JEL Classification: M41, L65
Suggested Citation: Suggested Citation