Discretionary disclosure and manager horizon: evidence from patenting

Stephen Glaeser (), Jeremy Michels () and Robert E. Verrecchia ()
Additional contact information
Stephen Glaeser: University of North Carolina
Jeremy Michels: University of Pennsylvania
Robert E. Verrecchia: University of Pennsylvania

Review of Accounting Studies, 2020, vol. 25, issue 2, No 6, 597-635

Abstract: Abstract We examine the relation between manager horizon and discretionary disclosure, using patenting as a measure of disclosure. Patenting reflects, in part, a manager’s decision to disclose the successful outcome of research and development (R&D). When a firm invests in R&D but does not patent, investors are unsure whether this reflects a failed R&D project or the manager choosing not to patent. We suggest that investors’ beliefs about a manager’s horizon—whether the manager seeks to maximize short-term stock price or long-term profits—moderates their reactions. When investors believe a manager’s horizon is short, they expect the manager to disclose successful outcomes and therefore discount nondisclosure more. We predict that managers will patent more per dollar of R&D spending when their horizons are short and that investors will discount the value of nondisclosing firms more when they believe the manager’s horizon is short. We find evidence consistent with these predictions.

Keywords: Discretionary disclosure; Voluntary disclosure; Manager horizon; Patents; Trade secrets; Innovation; Research and development; D23; M41; O30; O31; O32; O33 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://link.springer.com/10.1007/s11142-019-09520-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:reaccs:v:25:y:2020:i:2:d:10.1007_s11142-019-09520-0

Ordering information: This journal article can be ordered from
http://www.springer.com/accounting/journal/11142

DOI: 10.1007/s11142-019-09520-0

Access Statistics for this article

Review of Accounting Studies is currently edited by Paul Fischer

More articles in Review of Accounting Studies from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().