Redact to Protect? Customers’ Incentive to Protect Information and Suppliers’ Disclosure Strategies
62 Pages Posted: 27 Jun 2018 Last revised: 18 Jan 2022
Date Written: February 1, 2019
Abstract
We find that suppliers are more likely to redact mandated disclosures when major customers have proprietary information to protect (in the form of R&D intensity, trade secrets, and nondisclosure agreements), controlling for suppliers’ own proprietary cost concerns. Furthermore, the effect on suppliers’ redactions is concentrated in subsamples for which customers have greater power, measured by customer size, industry leadership, and the number of suppliers. Additionally, suppliers also curtail operations-related disclosures in the management discussion and analysis (MD&A) and product- and service-related press releases when customers likely have proprietary information to protect. Overall, these findings suggest that dependent suppliers internalize their customers’ disclosure incentives and curtail disclosures, catering to customers’ demand for information protection.
Keywords: Supply Chain, Customer, Supplier, Disclosure
JEL Classification: G14, G30, M41, D23
Suggested Citation: Suggested Citation