Three essays on strategic information disclosure

Abstract

Based on a sample of non-financial firms within the S&P 500 index over the period 2009 to 2018, this thesis investigates the determinants of corporate strategic information disclosure in three main areas in attempts to enhance the understanding of managers’ considerations when they make strategic decisions. I start by comprehensively reviewing existing studies on strategic information disclosure in Chapter 2, including discussions on the relevant concepts, theories, determinants, consequences, and measurements of strategic information disclosure. Chapter 3 investigates the impacts of ownership structure and product market competition on strategic information disclosure, separately and interactively. The results show that managerial and blockholder ownership and product market competition discourage firms to release strategic information. Specifically, the negative association between managerial ownership and strategic information disclosure is only found in non-competitive industries; therefore, product market competition can be viewed as a substitute for managerial ownership to influence managers’ strategic decisions. Moreover, the results show a mixed relationship between the interaction term (blockholder ownership interact with competition) and strategic information disclosure. The mixed relationship implies that the negative impact of blockholder ownership on strategic information disclosure decreases as product market competition increases; however, when product market competition reaches a certain level, the impact of blockholder ownership increases again. These results suggest that ownership structure and product market competition interact with each other to shape the corporate disclosure behaviour. Finally, my extended analyses show that compared with firms with strategic information disclosure in competitive industries, corporate strategic information disclosure leads to relatively easier access to finance, greater firm performance and higher firm value when companies operate in non-competitive industries. I also find that strategic information disclosure leads to harder access to finance and poorer firm performance when blockholder control is greater in the company. Chapter 4 investigates the association between managerial ability and strategic information disclosure. The results show that companies with high-ability managers are correlated with a lower level of strategic information disclosure. The potential economic interpretation of this negative relationship is that stakeholders’ uncertainty regarding firms’ performance and future prospects increases their information needs for companies and managers’ career concerns, thus resulting in increased managerial incentives to provide additional information; however, a firm with a high-ability manager is associated with less stakeholders’ uncertainty about the firm’s future, thus resulting in decreased outsiders’ demand for additional information and manager’s career concerns (Bochkay et al., 2019). Moreover, given the existence of the proprietary costs, high-ability managers are discouraged to provide additional strategic information (Bhojraj et al., 2004; Lu and Tucker, 2012). Chapter 5 examines how corporate reputation and CEO (chief executive officer) reputation, separately and jointly, affect strategic information disclosure. This study finds a significant and positive association between corporate reputation and strategic information disclosure, implying that more reputable companies have incentives to provide additional corporate strategies-related information to outsiders in order to signal their efforts and ability. However, the results show a significant and negative association between CEO reputation and strategic information disclosure, in support of managerial ability evidence in Chapter 4. Finally, the results suggest that the influence of CEO reputation on firms’ disclosure decisions making is stronger than the influence of corporate reputation; CEO reputation moderates the positive effect of corporate reputation on the level of strategic information disclosure.