The Spillover Effects of MD&A Disclosures for Real Investment: The Role of Industry Competition
Journal of Accounting and Economics, Forthcoming
77 Pages Posted: 24 Oct 2019
Date Written: October 8, 2019
Abstract
We explore whether disclosures in the Management Discussion & Analysis (MD&A) have spillover effects for investment and investment efficiency, and whether spillover effects vary with competition. We focus on the tone of MD&A disclosures and document that the association between a ompany’s investments and the tone of its rivals’ MD&A disclosures is positive. Moreover, this association is stronger when firms operate in industries that have lower entry costs, are larger, and have less substitutable products. We obtain similar results for investment efficiency. Overall, our evidence suggests that MD&A disclosures have spillover effects for investment that can improve investment efficiency, and that spillover effects are moderated by industry competition.
Keywords: spillover effects, disclosures, competition, investment, investment efficiency
JEL Classification: D43, G31, M4, M4
Suggested Citation: Suggested Citation