Rotterdam School of Management
Institutional Affiliation: Rotterdam School of Management
NBER Working Papers and Publications
|September 2019||Mandated Financial Reporting and Corporate Innovation|
with , : w26291
We investigate the impact of reporting regulation on corporate innovation activity. Exploiting thresholds in Europe’s regulation and a major enforcement reform in Germany, we find that forcing a greater share of firms to publicly disclose their financial statements reduces firms’ innovative activities. At the same time, it increases firms’ reliance on patenting to protect their innovations, to the extent they continue innovating. Our evidence is consistent with mandated reporting having significant real effects by imposing proprietary costs on innovative firms, which in turn diminishes their incentives to engage in innovative activities. Importantly, we examine aggregate effects at the industry level, net of spillovers. Thus, our results imply that positive information spillovers (e.g., to...