TY - JOUR
T1 - Disclosure Regulation and Competitive Interactions: Evidence from the Oil and Gas Industry
AU - Badia, Marc
AU - Duro, Miguel
AU - Jorgensen, Bjorn N.
AU - Ormazabal, Gaizka
N1 - Funding Information:
We thank Pietro Bonetti, Paul Healy, Patrick Hopkins (discussant), Daniele Macciocchi (discussant), Richard McVeel, Panos Patatoukas (discussant), Peter Pope, Nemit Shroff, Rodrigo S. Verdi (editor), Heather Wier, two anonymous reviewers, and seminar participants at HEC Paris, Maastricht University, University of Alberta, the 2016 London School of Economics-Manchester Business School Conference, 2016 UIC Conference, 2017 European Accounting Association Meeting, and the 2017 Financial Accounting and Reporting Section Midyear Meeting for helpful comments and suggestions. We also thank Wanyi Chen, Tian Fu, Shisheng Jiang, Lichao Liu, Colin McGee, Du Nguyen, Joaqu?n Peris, Elie Toubiana, and Javier S?nchez V?zquez de Parga for excellent research assistance. We are grateful to The CanOils Database Ltd. for giving us access to its database, and thank Jonathan Moore and Tracey Nabe for their continued help throughout this study. We thank Nathan Hedley and his team for kindly giving us access to the Evaluate Energy database and for their technical support. We benefited from conversations with industry practitioners and regulators. Specifically, we are indebted to John Lee (SEC Academic Engineering Fellow); Brian Banderk, David Elliot, and Carrie Nermo (Alberta Securities Commission); Gary Finnis (partner at Sproule Associates Ltd.); Douglas Isaac and Jim Saloman (partners at PricewaterhouseCoopers). Bjorn N. Jorgensen is a research fellow at the Danish Finance Institute. Gaizka Ormazabal thanks the Marie Curie and Ramon y Cajal Fellowships and the ??C?tedra de Direcci?n de Instituciones Financieras y Gobierno Corporativo del Grupo Santander.?? Marc Badia, Miguel Duro, and Gaizka Ormazabal acknowledge financial contributions from the Spanish Ministry of Economics, Industry, and Competitiveness, grants ECO2010-19314, ECO2011-29533, ECO2015-63711-P, and ECO2016-77579-C3-1-P.
Funding Information:
We thank Pietro Bonetti, Paul Healy, Patrick Hopkins (discussant), Daniele Macciocchi (discussant), Richard McVeel, Panos Patatoukas (discussant), Peter Pope, Nemit Shroff, Rodrigo S. Verdi (editor), Heather Wier, two anonymous reviewers, and seminar participants at HEC Paris, Maastricht University, University of Alberta, the 2016 London School of Economics-Manchester Business School Conference, 2016 UIC Conference, 2017 European Accounting Association Meeting, and the 2017 Financial Accounting and Reporting Section Midyear Meeting for helpful comments and suggestions. We also thank Wanyi Chen, Tian Fu, Shisheng Jiang, Lichao Liu, Colin McGee, Du Nguyen, Joaquín Peris, Elie Toubiana, and Javier Sánchez Vázquez de Parga for excellent research assistance. We are grateful to The CanOils Database Ltd. for giving us access to its database, and thank Jonathan Moore and Tracey Nabe for their continued help throughout this study. We thank Nathan Hedley and his team for kindly giving us access to the Evaluate Energy database and for their technical support. We benefited from conversations with industry practitioners and regulators. Specifically, we are indebted to John Lee (SEC Academic Engineering Fellow); Brian Banderk, David Elliot, and Carrie Nermo (Alberta Securities Commission); Gary Finnis (partner at Sproule Associates Ltd.); Douglas Isaac and Jim Saloman (partners at PricewaterhouseCoopers). Bjorn N. Jorgensen is a research fellow at the Danish Finance Institute. Gaizka Ormazabal thanks the Marie Curie and Ramon y Cajal Fellowships and the ‘‘Cátedra de Dirección de Instituciones Financieras y Gobierno Corporativo del Grupo Santander.’’ Marc Badia, Miguel Duro, and Gaizka Ormazabal acknowledge financial contributions from the Spanish Ministry of Economics, Industry, and Competitiveness, grants ECO2010-19314, ECO2011-29533, ECO2015-63711-P, and ECO2016-77579-C3-1-P.
Publisher Copyright:
© 2021 American Accounting Association. All rights reserved.
PY - 2021
Y1 - 2021
N2 - We study the effects of mandatory disclosure on competitive interactions in the setting of oil and gas (O&G) reserve disclosures by North American public firms. We document that reserve disclosures inform competitors: when one firm announces larger increases in O&G reserves, competitors experience lower announcement returns and higher real investments. To sharpen identification, we analyze several sources of cross-sectional variation in these patterns, the degree of competition, and the sign and the source of reserves changes. We also exploit two plausibly exogenous shocks: the tightening of the O&G reserve disclosure rules and the introduction of fracking technology. Additional tests more directly focused on the presence of proprietary costs confirm that the mandated reserve disclosures result in a relative loss of competitive edge for announcing firms. Our collective evidence highlights important trade-offs in the market-wide effects of disclosure regulation.
AB - We study the effects of mandatory disclosure on competitive interactions in the setting of oil and gas (O&G) reserve disclosures by North American public firms. We document that reserve disclosures inform competitors: when one firm announces larger increases in O&G reserves, competitors experience lower announcement returns and higher real investments. To sharpen identification, we analyze several sources of cross-sectional variation in these patterns, the degree of competition, and the sign and the source of reserves changes. We also exploit two plausibly exogenous shocks: the tightening of the O&G reserve disclosure rules and the introduction of fracking technology. Additional tests more directly focused on the presence of proprietary costs confirm that the mandated reserve disclosures result in a relative loss of competitive edge for announcing firms. Our collective evidence highlights important trade-offs in the market-wide effects of disclosure regulation.
KW - 512 Business and Management
KW - proprietary costs
KW - competition
KW - disclosure rules
KW - disclosure of oil and gas reserves
KW - informational spillovers
KW - real externalities of disclosure regulation
UR - https://www.mendeley.com/catalogue/3a05c31d-10dd-3c28-83c2-41e22a0ccb28/
UR - http://www.scopus.com/inward/record.url?scp=85115147946&partnerID=8YFLogxK
U2 - 10.2308/tar-2018-0436
DO - 10.2308/tar-2018-0436
M3 - Article
SN - 0001-4826
VL - 96
SP - 1
EP - 29
JO - The Accounting Review
JF - The Accounting Review
IS - 5
ER -
