Asymmetric Information and R&D Disclosure: Evidence from Scientific Publications

Abstract

We examine how asymmetric information in financial markets affects voluntary research and development (R&D) disclosure, considering scientific publications as a disclosure channel. Difference-in-differences regressions around brokerage house mergers and closures, which increase information asymmetry through reductions in analyst coverage, indicate a quick and sustained increase in scientific publications from treated firms relative to the number of publications from control firms. The treatment effects are concentrated among firms with higher information asymmetry and lower investor demand, firms with greater financial constraints, and firms with lower proprietary costs. We do not find evidence of changes in financial disclosure, nor do we find changes in patenting. Results from ordinary least squares regressions show that scientific publications by firms are positively associated with investor attention toward those firms. We complement these results with qualitative evidence from conference calls. Our results highlight the limitations and trade-offs R&D firms face in their financial market disclosure policies. This paper was accepted by Brian Bushee, accounting. Funding: This work was supported by the Danish Independent Research Fund [Grant 0133-00119B] and the Spanish Ministry of Science, Innovation and Universities [Grant PGC2018-094418-B-I00]. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4721 .