Reporting Regulation and Corporate Innovation

Matthias Breuer, Christian Leuz and Steven Vanhaverbeke

No 8, LawFin Working Paper Series from Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin)

Abstract: We investigate the impact of reporting regulation on corporate innovation. Exploiting thresholds in Europe's regulation and a major enforcement reform in Germany, we find that forcing firms to publicly disclose their financial statements discourages innovative activities. Our evidence suggests that reporting regulation has significant real effects by imposing proprietary costs on innovative firms, which in turn diminish their incentives to innovate. At the industry level, positive information spillovers (e.g., to competitors, suppliers, and customers) appear insufficient to compensate the negative direct effect on the prevalence of innovative activity. The spillovers instead appear to concentrate innovation among a few large firms in a given industry. Thus, financial reporting regulation has important aggregate and distributional effects on corporate innovation.

Keywords: Financial Reporting; Disclosure; Regulation; Innovation; Patents; Growth (search for similar items in EconPapers)
JEL-codes: K22 L51 M41 M42 M48 O43 O47 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-acc, nep-fdg, nep-law and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Reporting regulation and corporate innovation (2021)
Working Paper: Reporting Regulation and Corporate Innovation (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:lawfin:8

DOI: 10.2139/ssrn.3449813

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