Corporate risk disclosure in response to heightened entry threat: Evidence from a quasi-natural experiment in China
Year: 2024
Type: article
Abstract: Using the deregulation of market entry barriers in China as a quasi-natural experiment, this study examines how increased entry threats affect incumbent firms' risk disclosure. We find that firms respond by increasing their market-related risk disclosures. This effect is stronger among firms facing higher economic uncertainty, lower financial constraints, greater product market competition, and higher information transparency. Mechanism analysis shows that increased risk disclosure weakens the link between deregulation of market entry barriers and new firm entry, suggesting that such disclosures can effectively deter potential competitors. Moreover, while market reactions to market risk disclosures are neutral, they are negative for operational and financial risk disclosures. Our findings suggest that firms strategically disclose market risks to mitigate entry threats, thus enhancing their resilience and adaptability in dynamic markets.
Source: Global Finance Journal
Authors: Jingru Wang, Zhuochen Wu, Xinwei Fang, Haoxin Xiu
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $2,570
OpenAlex ID: W4403285374