The effect of financial reporting on strategic investments : evidence from purchase obligations
Name
1191222150-MIT.pdf
Size
1.13 MB
Format
Adobe PDF
Checksum (MD5)
4ab5c3eae9eca8c4b9e9d7c1fee14be9
Author(s)
Noh, Suzie.
Advisor(s)
Eric So and Rodrigo Verdi.
Eric So and Rodrigo Verdi.
Date Issued
2020
Publisher
Massachusetts Institute of Technology
Abstract
I examine whether mandating the disclosure of investments influences firms' strategic interactions. I exploit an SEC regulation requiring firms to report off-balance sheet purchase obligations, such as commitments to inventory purchases, CAPEX, R&D, and advertising. Motivated by theory on strategic investments, I predict and find that firms respond to the regulation by increasing investments if they have substitutive product market strategies with competitors, and decreasing investments if they have complementary strategies. This two-way finding is consistent with firms using investments to influence competitors' behavior in ways that increase their own profits. I show that changes in investments are concentrated among firms with large market share, which have a greater ability to influence competitors' actions, and that they have real effects on firms' sales and profit margins. Collectively, my results illustrate a novel channel through which financial reporting shapes firms' investments and competition.
Description
Thesis: Ph. D., Massachusetts Institute of Technology, Sloan School of Management, May, 2020
Cataloged from PDF version of thesis.
Includes bibliographical references (pages 51-53).
Subjects
Sloan School of Management.
MIT Department
Sloan School of Management
Terms of Use
MIT theses may be protected by copyright. Please reuse MIT thesis content according to the MIT Libraries Permissions Policy, which is available through the URL provided.
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