The Effects of Proprietary Information on Corporate Disclosure and Transparency: Evidence from Trade Secrets
69 Pages Posted: 25 Apr 2017 Last revised: 23 Jun 2018
Date Written: April 2018
I examine the effects of proprietary information on corporate transparency and voluntary disclosure. To do so, I develop and validate two measures of firms’ reliance on trade secrecy: one based on 10-K disclosures and one based on subsequent litigation outcomes. I complement these measures by using the staggered passage of the Uniform Trade Secrets Act as a shock to trade secrecy. I find that firms that begin to rely more heavily on trade secrecy substitute increased voluntary disclosure of nonproprietary information for decreased disclosure of proprietary information. The total effect of trade secrecy is a decrease in corporate transparency.
Keywords: proprietary costs, trade secrets, disclosure, information asymmetry, innovation, patents
JEL Classification: D23, G30, O31, O32, O33, O34, O38
Suggested Citation: Suggested Citation