Proprietary Information Cost of Contracting with the Government

58 Pages Posted: 26 Feb 2021 Last revised: 5 Jun 2021

See all articles by Jiapeng He

Jiapeng He

University of Texas at Dallas

Kevin K. Li

Santa Clara University

Ningzhong Li

University of Texas at Dallas

Weining Zhang

Cheung Kong Graduate School of Business

Date Written: December 29, 2020

Abstract

We argue that contracting with the federal government involves significant proprietary information cost due to regulations requiring contractors to provide confidential information, which may then become available to outsiders via Freedom of Information Act (FOIA) requests. We provide evidence by showing that firms become more willing to bid for government contracts after a recent Supreme Court ruling on FOIA that improves information protection for contractors, and the effect is stronger when the contracts incur higher information cost for contractors. In addition, stock prices of firms with larger amounts of government contracts respond more positively to the ruling.

Keywords: Freedom of Information Act, Government Contractors, Proprietary Cost, Confidential Information

JEL Classification: K4, M4

Suggested Citation

He, Jiapeng and Li, Kevin K. and Li, Ningzhong and Zhang, Weining, Proprietary Information Cost of Contracting with the Government (December 29, 2020). Available at SSRN: https://ssrn.com/abstract=3780799 or http://dx.doi.org/10.2139/ssrn.3780799

Jiapeng He

University of Texas at Dallas ( email )

800 W Campbell Rd
Richardson, TX 75080
United States

Kevin K. Li

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

Ningzhong Li (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Weining Zhang

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China

HOME PAGE: http://english.ckgsb.edu.cn/FacultyResearch/Faculty/Accounting/ZhangWeining.aspx

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