Voluntary Disclosure and Corporate Innovation
Posted: 16 Jan 2019
Date Written: January 8, 2019
We examine whether a firm’s voluntary disclosures, proxied by management earnings forecasts, affect its innovation activity. A firm making more disclosures generates fewer patents and lower-quantity patents. Enactment of SOX is applied as a natural experiment for an exogenous shock to voluntary disclosure. Corporate innovation is reduced for accelerated filers, especially after SOX becomes effective. Nondedicated institutional ownership, R&D spillover, and rival firms’ innovation are higher for accelerated filers after SOX. There is more of a negative effect of voluntary disclosure on innovation activity when product markets are highly competitive, industry information diffusion is speedy, and disclosures are more informative.
Keywords: Innovation; Patent; Voluntary Disclosure; SOX
JEL Classification: D82; G38; M41; O31
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