Proprietary Costs and Corporate Lobbying against Changes in Mandatory Disclosure

52 Pages Posted: 16 Dec 2021 Last revised: 14 Jul 2022

See all articles by Ying Zhou

Ying Zhou

University of Connecticut

Multiple version iconThere are 2 versions of this paper

Date Written: September 20, 2021


The mandated increase in segment disaggregation under SFAS 131 could have harmed shareholders by revealing proprietary information or benefited them by reducing agency problems. Using a sample of firms that lobbied against SFAS 131 on the grounds of competitive harm, I examine whether concerns about proprietary costs, a much-cited reason for nondisclosure, motivate firms to lobby against reporting mandates to protect firms’ competitive position or are used as an excuse to disguise managers’ self-interest. Consistent with the proprietary cost hypothesis, I find that these lobbying firms experienced a decrease in operating performance upon adoption of SFAS 131. I find similar results for non-lobbying firms whose industry associations voiced the concern of competitive harm, suggesting that associations are motivated by member concerns to lobby in accounting standard setting. The effect is more pronounced for firms that were forced to increase the number of reportable segments to a greater extent. Moreover, the reduced operating performance arises from lower sales growth and smaller profit margins. These findings shed light on lobbying motives and suggest that concerns about the competitive harm of reporting mandates were warranted.

Keywords: lobbying, disclosure regulation, proprietary costs, competitive harm, segment reporting

JEL Classification: M40, M41, M48

Suggested Citation

Zhou, Ying, Proprietary Costs and Corporate Lobbying against Changes in Mandatory Disclosure (September 20, 2021). Management Science, Forthcoming, University of Connecticut School of Business Research Paper No. 22-04, Available at SSRN: or

Ying Zhou (Contact Author)

University of Connecticut ( email )

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