Proprietary Costs and the Disclosure of Information About Customers

Authors

  • JESSE A. ELLIS,

    1. Culverhouse College of Business, University of Alabama
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  • C. EDWARD FEE,

    1. Department of Finance, Eli Broad College of Business, Michigan State University
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  • SHAWN E. THOMAS

    1. Katz Graduate School of Business, University of Pittsburgh. We thank seminar participants at Nanyang Technological University, North Carolina State University, Tulane University, and the University of Pittsburgh for helpful comments and suggestions. Any errors remain our own.
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ABSTRACT 

In deciding how much information about their firms’ customers to disclose, managers face a trade off between the benefits of reducing information asymmetry with capital market participants and the costs of aiding competitors by revealing proprietary information. This paper investigates the determinants of managers’ choices to disclose information about their firms’ customers using a comprehensive data set of customer-information disclosures over the period 1976–2006. We find robust evidence in support of the hypothesis that proprietary costs are an important factor in firms’ disclosure choices regarding information about large customers.

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