Does Global Outsourcing Affect Corporate Customers’ Voluntary Disclosures?

65 Pages Posted: 24 Aug 2020 Last revised: 5 Mar 2021

See all articles by Lili Dai

Lili Dai

University of New South Wales (UNSW)

Rui Dai

Wharton Research Data Services (WRDS)

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Zihang Ryan Peng

University of New South Wales

Date Written: February 4, 2021

Abstract

Global outsourcing has become an economic imperative for many major corporations worldwide, but at the same time, it has brought substantial risks and uncertainties to these firms. In this study, we examine whether global outsourcing of goods or services shapes U.S. corporate disclosure policies. Our main results indicate a negative relation between global outsourcing and voluntary disclosure. Further, identification tests show that managers reduce voluntary disclosures when they first outsource their inputs globally and when suppliers’ countries experience spikes in trade uncertainty and political risks. The global outsourcing effect on disclosure is stronger when corporate customers face a higher litigation risk, when there is less information transfer between customers and suppliers, and when customers are in more competitive product markets. Collectively, these results suggest that corporate customers decrease voluntary disclosures due to increased uncertainties along the global supply chain.

Keywords: Corporate Customers, Global Supply Chains, Voluntary Disclosure

JEL Classification: G23, G30, G34, M14

Suggested Citation

Dai, Lili and Dai, Rui and Ng, Lilian and Peng, Zihang Ryan, Does Global Outsourcing Affect Corporate Customers’ Voluntary Disclosures? (February 4, 2021). Available at SSRN: https://ssrn.com/abstract=3674690 or http://dx.doi.org/10.2139/ssrn.3674690

Lili Dai (Contact Author)

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

HOME PAGE: http://sites.google.com/site/ldaiprofile

Rui Dai

Wharton Research Data Services (WRDS) ( email )

3819 Chestnut St
Suite 300
Philadelphia, PA PA 19104
United States

Lilian Ng

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
4700 Keele Street
Toronto, Ontario ON M3J 1P3
Canada
+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Zihang Ryan Peng

University of New South Wales ( email )

Kensington
High St
Sydney, NSW 2052
Australia

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