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The effect of trade secrets protection on disclosure of forward‐looking financial information

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  • Yan Li
  • Yutao Li

Abstract

Using the recognition of the Inevitable Disclosure Doctrine (IDD) by US state courts as an exogenous shock to the risk of losing trade secrets, this study examines the effects of trade secrets on disclosure of forward‐looking financial information. We find that management earnings forecast frequency and forecast horizon increases after the US state where a firm is headquartered starts to recognize IDD. We also find that the effect of IDD recognition on management forecasts is more pronounced for firms that have larger market shares, higher product market competition, more intensive R&D, shorter distance to their industry rivals, and more employees who possess knowledge of the firms’ trade secrets.

Suggested Citation

  • Yan Li & Yutao Li, 2020. "The effect of trade secrets protection on disclosure of forward‐looking financial information," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(3-4), pages 397-437, March.
    • Handle: RePEc:bla:jbfnac:v:47:y:2020:i:3-4:p:397-437
    DOI: 10.1111/jbfa.12418
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