Revealing or concealing? The competitive landscape of bad news disclosure

We examine how product market competition influences corporate disclosure of adverse news. Our results indicate that firms facing intense competition from existing rivals tend to withhold unfavorable information from stakeholders such as competitors, customers, and investors. In contrast, the threat of new entrants encourages firms to disclose more adverse news as a strategy to deter competition and preserve customer relationships. Our study reconciles seemingly contradictory findings from prior research on competition and disclosure strategies. We highlight that the relationship is shaped by a broader set of corporate strategic considerations, encompassing competitor, customer, and investor dynamics, beyond managerial self-interest.