Trade secrets law and corporate disclosure: Causal evidence on the proprietary cost hypothesis

Trade secrets law and corporate disclosure: Causal evidence on the proprietary cost hypothesis

This study exploits the staggered adoption of the inevitable disclosure doctrine (IDD) by U.S. state courts as an exogenous shock that generates variations in the proprietary costs of disclosure. We find that firms respond to IDD adoption by reducing the level of disclosure regarding their customers...

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Bibliographic Details
Main Authors: LI, Yinghua, LIN, Yupeng, ZHANG, Liandong
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2018
Subjects:
Proprietary Costs
Corporate Disclosure
Customer Identity
Inevitable Disclosure Doctrine
Trade Secrets Law
Accounting
Business and Corporate Communications
Corporate Finance
Online Access:https://ink.library.smu.edu.sg/soa_research/1646
https://ink.library.smu.edu.sg/context/soa_research/article/2673/viewcontent/SSRN_id3025877.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:This study exploits the staggered adoption of the inevitable disclosure doctrine (IDD) by U.S. state courts as an exogenous shock that generates variations in the proprietary costs of disclosure. We find that firms respond to IDD adoption by reducing the level of disclosure regarding their customers’ identities, supporting the proprietary cost hypothesis. Our results are stronger for firms in industries with a higher degree of entry threats, for firms in more volatile industries, and for firms with a lower degree of external financing dependence. Overall, this study represents one of the first efforts in identifying the causal effect of proprietary costs of disclosure on the supply of disclosure.

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