Spillover Effect of Government Subsidies on Peer Firm Disclosure (Job Market Paper)
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| Abstract: The federal and state governments of the United States frequently utilize government subsidies to support businesses. While previous studies have focused on how subsidies affect the recipient firms, the spillover effects on other non-recipient peer firms have received less attention. This research investigates how peer firms respond to government subsidies awarded to their competitors, particularly through changes in their disclosures. The findings reveal that peer firms significantly increase their disclosures in 10-K filings, 8-K filings, and corporate website content. This increase in transparency is more pronounced among peer firms with weaker profitability, lower stock performance, greater financial constraints, and exposure to heightened competition — suggesting that firms facing greater pressure are more likely to adjust their disclosure in response to subsidy shocks. These findings reveal how peer firms strategically enhance transparency to navigate the challenges posed by subsidized competition. |
