research
Do Customer Disclosures Affect Suppliers’ Internal Capital Allocation Decisions?
Committee Members: Sugata Roychowdhury (chair), Ronald Dye, Jung Min Kim, Mihir Mehta
This study investigates whether suppliers’ internal capital allocations are affected by increases in customers’ public disclosures. Suppliers often hold private information about their customers, which provides a competitive advantage. However, mandated disclosures of potentially proprietary information, e.g., SFAS 131, can attract new entrants to the supplier market. The findings suggest that suppliers invest in production capacity in response to competitive threats spurred by greater customer disclosures. Furthermore, suppliers amend internal capital decisions to favor segments involving customers with increased disclosures, contrary to what Tobin’s q prescribes. Using segment-level data, I show that supplier segments invest significantly more (“over-invest”) relative to growth signals when they have customers who expanded disclosures. Additional analysis shows that my results are driven by strategic entry deterrence incentives rather than the resolution of the information asymmetry problem. This study provides novel insights into the spillover effects of SFAS 131.
Do Companies Use Their Nonprofits to Earn Profits?
This study investigates whether companies use donations to nonprofits as a means to earn profits through political connections. While previous research highlights the regulatory and legislative benefits of political influence, evidence of pecuniary benefits derived from the nonprofit channel remains limited. This research focuses on the electric utility industry and uses the regulatory framework for determining electric rates to assess the profitability of this strategy. The findings reveal that (a) the profit earned per dollar from charitable contributions is lower than that from campaign contributions, (b) companies allocate approximately ten times more funds to donations than to lobbying, and (c) total profits derived from philanthropic spending exceed those from lobbying efforts. Overall, this paper provides valuable insights into the profitability of corporate philanthropy as a tool for political influence.
The Impact of Standardized Disclosure on Private Information Production: Evidence from Korean IPOs
Coauthor: Yongseok Kim