Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248410 
Year of Publication: 
2021
Series/Report no.: 
CFS Working Paper Series No. 675
Publisher: 
Goethe University Frankfurt, Center for Financial Studies (CFS), 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: 
Innovation
Regulation
Disclosure
Financial Reporting
Patents
Growth
JEL: 
K22
L51
M41
M42
M48
O43
O47
Document Type: 
Working Paper

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