Contract contingencies and uncertainty: Evidence from product market contracts

• 成果类型: Article
• 署名作者: Hui, Kai Wai; Oh, Jun; She, Guoman; Yeung, P. Eric
• 署名单位: University of Hong Kong; Purdue University System; Purdue University; Cornell University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101; 1879-1980
• DOI: 10.1016/j.jacceco.2024.101743
• 发表日期: 2025
• 页码: 101743
• 关键词: incomplete contracting; contingencies; uncertainty; Writing costs; Re-negotiation costs; INNOVATION; research-and-development; incomplete contracts; INFORMATION; COSTS; investments; spillovers; management; governance; disclosure; RIGIDITY

摘要

We study contingencies written in firms' material product market contracts, focusing on the theoretical prediction of uncertainty as an important determinant. We identify contract contingencies from firms' public regulatory filings and examine the effects of general business uncertainty and specific innovation-related uncertainty. To enhance causal inference, we utilize two major business shocks (i.e., the 2008 Financial Crisis and the COVID pandemic) and the diffusion of 29 disruptive innovation shocks (Bloom et al., 2021). We also explore the effects of renegotiation costs and writing costs. Overall, our empirical results are consistent with predictions from dynamic models of incomplete contracting.