Industry Entry Barriers and Voluntary Disclosure

• In Event: Industry, Macro Economy, and Firm Disclosure

Abstract

Motivated by theoretical studies on endogenous proprietary costs of voluntary disclosure (e.g., Darrough and Stoughton [1990], Wagenhofer [1990]), we predict a non-monotonic (U-shape) relation between industry entry barriers and firm voluntary disclosure level, and expect this U-shape relation to be more likely to manifest in industries with more adverse effects of new entrants on incumbent firms. Measuring industry entry barriers with industry analysts’ assessment of overall difficulty in entering an industry provided by IBISWorld Inc., and voluntary disclosure with the likelihood and frequency of management forecasts, we document strong empirical evidence consistent with our predictions.

Authors

• Ying Huang, University of Texas at Austin

• Ningzhong Li, University of Texas-Dallas

• Yong Yu, The University of Texas at Austin