Public Firm Presence, Financial Reporting, and the Decline of U.S. Manufacturing

Journal of Accounting Research, Forthcoming

74 Pages Posted: 14 Aug 2019 Last revised: 30 Nov 2021

See all articles by Stephen Glaeser

Stephen Glaeser

University of North Carolina (UNC) at Chapel Hill

James D. Omartian

University of Michigan - Ross School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: August 11, 2019

Abstract

We examine the relation between public firm presence and import competition. The information created by public firm presence may provide importers with insights they can use for competing with domestic firms. Consistent with this possibility, we document a positive relation between public firm presence and import competition. We find similar results when using differences in the expected costs of the Sarbanes-Oxley Act as a source of plausibly exogenous variation in public firm presence after the act. We use differences in the proportion of German firms reporting publicly around a major enforcement reform as a natural mechanism experiment, and find evidence that financial reporting is a channel through which public firm presence relates to import competition. Additional mechanism tests and a falsification test estimated in the United Kingdom, where public and most private firms report publicly, further support this inference. In total, our evidence is consistent with foreign competitors using the information created by public firm presence, including what public firms disclose in financial reports, to compete with domestic firms. Consequently, our results provide evidence of competitors using the proprietary information disclosed in financial reports to compete with the disclosing firms and of information frictions affecting trade.

Keywords: Competition, Trade, Private Firms, Public Firms, Financial Reporting, Proprietary Costs, Disclosure Externalities

JEL Classification: F14, F16, G18, G38, L60, M41

Suggested Citation

Glaeser, Stephen and Omartian, James D., Public Firm Presence, Financial Reporting, and the Decline of U.S. Manufacturing (August 11, 2019). Journal of Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3435834 or http://dx.doi.org/10.2139/ssrn.3435834

Stephen Glaeser (Contact Author)

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

James D. Omartian

University of Michigan - Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI 48109-1234
United States

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