Peer R&D disclosure and corporate innovation: Evidence from American depositary receipt firms

Elizabeth A. Gordon, Hsiao-Tang Hsu and Huichi Huang

Advances in accounting, 2020, vol. 49, issue C

Abstract: In this paper, we examine the effect of peer research and development (R&D) disclosures on corporate innovation. R&D disclosures can generate externalities for related firms, enabling those firms to better infer a project's likely payoffs and thus prioritize projects with higher net present values. We use a sample of foreign firms cross-listed on U.S. exchanges to investigate whether U.S. peer firms experience externalities from the cross-listing firm's R&D disclosures. We find that R&D disclosures by cross-listing firms are associated with greater innovation for industry peers in the U.S. market, especially when product market competition is high. The effect also varies with the home country's legal protection systems, disclosure environments, and accounting reporting rules. Cross-sectional analyses indicate that the externalities are more pronounced in industries or firms that rely more on external financing and firms subject to higher financial constraints; disclosures of higher quality appear to promote innovation by ameliorating financing frictions. Overall, this study provides evidence of R&D disclosure as an industry-wide determinant of innovation, thereby contributing to literature on the real effects of peer disclosures.

Keywords: Research & development; Peer-firm disclosures; Innovation; Cross-listing (search for similar items in EconPapers)
JEL-codes: G15 G30 M41 O32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:49:y:2020:i:c:s0882611020300419

DOI: 10.1016/j.adiac.2020.100471

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