Life Cycles of Firm Disclosures

Abstract

We examine the link between product life cycles and disclosure using a novel 4-stage text-based life cycle model and report two main results. Firms with peers having mature-stage products disclose more, consistent with collaborative disclosure across peers to deter entry and improve market stability. In addition to disclosing more, these firms also have higher profits, lower risk, and mention fewer disruption concerns. In contrast, the standard link between competition and less disclosure is significantly amplified when industry peers are in the product development stage of the life cycle, as product placements are not yet public and are important to conceal. Our product life cycle results are new to the literature, have large economic magnitudes, and are reinforced by a quasi natural experiment based on patent expirations.

Keywords: Disclosures, Product Life-Cycle, Competition, Patents, Intellectual Property, Market Stability

JEL Classification: D83, L15, M41