Three Essays on Corporate Voluntary Disclosure

Abstract

Corporate voluntary disclosure is critical for the functioning of market-based economies as they are important means for firms to communicate their performance and governance, convey value-relevant information to various stakeholders, reduce information asymmetry, decrease firms' cost of capital, and enhance the overall efficiency in the capital market. My thesis focuses on the determinants of corporate voluntary disclosures. My first study examines whether and how the physical working environment affects management earning forecast quality. I find that firms headquartered in buildings with the better physical working environment is associated with higher management earnings forecasts quality. My results are robust to a battery of robustness tests, including two-stage least squares regressions. I further show that the positive impact of the physical working environment on management forecast quality is more pronounced for firms' headquarters in the areas with more adverse outdoor environments, for firms with the more volatile operating environment, and firms with less capable employees. I also examine the possible channel through which firms' physical working environment affects management forecast quality and find that the impact of physical working environment on management forecast quality could be attributable to the physical well-being of firms' employees. My second study investigates whether and how non-practicing entities (or "patent trolls") affect corporate narrative R&D disclosure using demand letters. Exploiting the staggered adoption of Anti-Troll legislation in 33 U.S. states as an exogenous shock that limits trolls' ability to send out bad-faith demand letters, I find that in response to the passage of state Anti-Troll legislation, firms tend to increase both the quantity and detail of narrative R&D disclosures. I further find that this effect is stronger for firms facing higher proprietary costs of disclosure and for firms facing lower levels of information demand from external stakeholders. My results are robust for firms that are prone to demand letters and are also robust after controlling for firms' geographic dispersion. Overall, my findings suggest that patent trolls, an alternative source of firms' proprietary costs, play a crucial role in shaping a firm's R&D disclosure strategy. My third study examines whether and how U.S. local political corruption affects firms' narrative R&D disclosures. Using the number of regional corruption convictions of public officials around firms' headquarters to capture local political corruption, I find that firms in more corrupt areas reduce both the narrative R&D disclosure quantity and details. The effects are more pronounced for firms with concentrated operations in their headquarter states and firms that are more dependent on government but are moderated by firms' political connections. Overall, my results suggest that firms manage narrative R&D disclosures to deter rent-seeking by local corrupt officials. Show more