Firm Boundaries and Voluntary Disclosure

Abstract

We study how firms' boundaries shape their public disclosures. Theories at the intersection of accounting and economics suggest that firms can use public disclosure to coordinate credibly with supply chain partners, and predict that more vertically integrated firms provide less public disclosure about their future business plans. Using data on the extent to which firms are vertically integrated, we find that those firms that become more vertically integrated reduce their public disclosure about their products, and that such disclosures help mitigate informational and strategic frictions along the supply chain.

Keywords: Firm Boundaries, Vertical Integration, Product Disclosure, Coordination Role of Disclosure

JEL Classification: D83, G14, L14, M41