Global outsourcing and voluntary disclosure

• Published in: Journal of business finance & accounting Vol. 51; no. 3-4; pp. 846 - 879
• Main Authors: Dai, Lili, Dai, Rui, Ng, Lilian, Peng, Zihang
• Format: Journal Article
• Language: English
• Published: Oxford Blackwell Publishing Ltd 01.03.2024
• Subjects: global outsourcing; Litigation; Outsourcing; Side effects; Supply; supply network; voluntary disclosure
• ISSN: 0306-686X; 1468-5957
• DOI: 10.1111/jbfa.12773

Reliance on global outsourcing has become an economic imperative for many major corporations worldwide, but at the same time, it has brought substantial risks and complexities to these firms. This study employs novel international supply chain data to examine whether global outsourcing of goods or services shapes US corporate disclosure policies. Our main results suggest a negative impact of global outsourcing exposure on voluntary disclosure, and several identification tests further support this baseline evidence. We find that the adverse effect on disclosure is more pronounced when institutional differences are more significant between the United States and foreign suppliers' countries and when US firms face higher litigation risks. However, the effect weakens when investors and stakeholders demand more information. Collectively, our study provides new insights into the economic implications of outsourcing globally from an information disclosure perspective.