Entry Threats and Voluntary Disclosure

• In Event: Determinants and Consequences of Management Communication

Abstract

We exploit the relaxation of interstate bank branching restrictions in the 1990s to ex-
amine how the threat of new entrants affects incumbents' voluntary disclosure choices.
The Interstate Banking and Branching Efficiency Act relaxed interstate banking and
branching restrictions, thereby increasing competitive entry threats. The Act was im-
plemented over several years and to varying degrees by different states, allowing us to
identify the effect of changes in potential entry on the voluntary disclosure decisions of
both public and private banks. Controlling for changes in actual entry and changes in
state-level economies, we find that increases in the threat of new entrants are associated
with increases in the level of voluntary disclosure as measured by press releases. Our
results are consistent with theoretical predictions that higher levels of entry threats
lead to higher levels of disclosure.

Authors

• Jeffrey J Burks, University of Notre Dame

• Christine Cuny, The University of Chicago

• Joseph Gerakos, The University of Chicago

• Joao Granja, The University of Chicago