Public Firm Presence, Financial Reporting, and the Decline of U.S. Manufacturing
65 Pages Posted: 14 Aug 2019 Last revised: 18 Sep 2019
Date Written: August 11, 2019
We document evidence of a positive association between public firm presence and import competition. Using cross-sectional differences in the expected costs of the Sarbanes-Oxley Act as an instrument for changes in public firm presence after the Act, we find evidence that public firm presence causes changes in import competition. Subsequent mechanism tests suggest that this effect arises because U.S. securities regulation requires public firms to prepare and make publicly available audited financial reports. Although these reports are purportedly for the benefit of investors, our mechanism tests suggest that foreign competitors also make use of the performance and investment information disclosed in these reports to compete with U.S. firms.
Keywords: Competition, Trade, Private Firms, Public Firms, Financial Reporting, Proprietary Costs, Disclosure Externalities
JEL Classification: F14, F16, G18, G38, L60, M41
Suggested Citation: Suggested Citation