Does Global Outsourcing Affect Corporate Customers’ Voluntary Disclosures?

Abstract

Reliance on global supply chains (GSCs) 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 examines whether global outsourcing of goods or services shapes U.S. corporate disclosure policies. Our main results suggest a negative impact of GSC 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 U.S. and foreign suppliers’ countries and when U.S. firms face higher litigation risks. However, the effect weakens when investors and stakeholders demand more information. Collectively, from an information disclosure perspective, our study provides new insights into the potential costs of outsourcing globally, leading to a reduction in forward-looking information provided to capital markets.