Breaking it Down: Economic Consequences of Disaggregated Cost Disclosures

• 成果类型: Article
• 署名作者: Berger, Philip G.; Choi, Jung Ho; Tomar, Sorabh
• 署名单位: University of Chicago; Stanford University; Southern Methodist University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4780
• 发表日期: 2024
• 页码: 1374-1393
• 关键词: competition; cost innovation; Cost Structure; disaggregated cost disclosure; Process innovation; performance dispersion; PROPRIETARY COSTS; voluntary disclosure

摘要

Motivated by the Financial Accounting Standards Board's project on the disaggregation of income statement expenses, we study a Korean rule change that allowed firms to withhold a previously mandated disaggregation of cost of sales (CoS). We find that after withholding, firms' profitability increases by 1.6 percentage points. Our industry-focused results suggest that withholding affects profitability by reducing the transfer of competitive information to peer firms. We then document a range of evidence consistent with the idea that firms withhold disaggregated CoS to protect cost innovations from rivals. First, we construct a novel measure of firms' cost-innovative potential and show that it predicts withholding and subsequent profitability gains under the voluntary disclosure regime. Second, we document efficiency gains following the withholding of disaggregated CoS. Third, our survey experiment of 1,257 U.S. public firm managers shows that they would reduce investments in process/cost innovations if they were required to disaggregate CoS. Our study highlights to standard setters and academics that CoS disaggregation entails operational consequences for firms.