Join us for a thought-provoking lecture on accounting research with Kris Allee of the University of Arkansas.

Kristian D. Allee, the Doyle Z. Williams Chair in Professional Accounting at the University of Arkansas, graduated from Indiana University (Brigham Young University) with a PhD in Accounting (with BS/MAcc degrees). Kris’ research examines firms’ disclosure policies, textual analysis and computational linguistics on firm disclosures, the production and use of financial statements by small businesses, cost of equity capital, and corporate tax policies. He has published research in The Accounting Review, Journal of Accounting Research, Contemporary Accounting Research, Review of Accounting Studies, Accounting Organizations and Society, Management Science, and the Journal of Management Accounting Research. 

Product Market Competition and Disclosure Framing: 
Evidence from Earnings Conference Calls

Abstract: Voluntary disclosures increase proprietary costs. An extensive stream of literature has investigated how product market competition, by increasing the proprietary costs of disclosure, influences corporate disclosure policy. However, prior research generally examines mandatory and voluntary disclosures as a binary choice: disclose or withhold. We hypothesize that the extent of proprietary costs incurred is not only determined by whether a disclosure is made, but also by how the disclosure is framed. Therefore, we investigate the association between product market competition and disclosure framing. We predict and find that intensity of competition in the product market is associated with more negative and uncertain earnings calls, both in the management prepared narrative and managers’ responses to analysts’ questions. We document that our results are robust to common selection bias methods (i.e., matched sampling on observables) and consistent with an alternative measure of linguistic framing (disclosure length) and in an alternative channel of disclosure with an alternative measure of linguistic framing (i.e., disclosure complexity in 10-Ks). In addition, we show that the result is stronger for firms with high intellectual property rights and robust to firm lifecycle concerns. Our results demonstrate that managers mitigate proprietary costs by managing disclosure structure and framing. Our paper responds to calls for research on the association between proprietary costs and managers’ disclosure decisions, and the tradeoff of various disclosure choices.