Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/244688 
Year of Publication: 
2020
Series/Report no.: 
LawFin Working Paper No. 8
Publisher: 
Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin), Frankfurt a. M.
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.
Subjects: 
Financial Reporting
Disclosure
Regulation
Innovation
Patents
Growth
JEL: 
K22
L51
M41
M42
M48
O43
O47
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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