Reporting regulation and corporate innovation

  • We investigate the impact of reporting regulation on corporate innovation. Exploiting thresholds in Europe’s regulation and a major enforcement reform in Germany, we find that forcing firms to publicly disclose their financial statements discourages innovative activities. Our evidence suggests that reporting regulation has significant real effects by imposing proprietary costs on innovative firms, which in turn diminish their incentives to innovate. At the industry level, positive information spillovers (e.g., to competitors, suppliers, and customers) appear insufficient to compensate the negative direct effect on the prevalence of innovative activity. The spillovers instead appear to concentrate innovation among a few large firms in a given industry. Thus, financial reporting regulation has important aggregate and distributional effects on corporate innovation.

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Author:Matthias Breuer, Christian LeuzORCiDGND, Steven Vanhaverbeke
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 675
Series (Serial Number):CFS working paper series (675)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Date of Publication (online):2021/12/22
Date of first Publication:2021/12/22
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2022/01/10
Tag:Disclosure; Financial Reporting; Growth; Innovation; Patents; Regulation
Page Number:94
Another version of this paper is available at: Breuer, Matthias and Leuz, Christian and Vanhaverbeke, Steven, Reporting Regulation and Corporate Innovation (August 26, 2020). LawFin Working Paper No. 8, Available at SSRN: or
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht