Entry Threats and Voluntary Disclosure

Abstract

We use the relaxation of interstate branching restrictions under the Interstate Banking and Branching Efficiency Act (IBBEA) to examine how increases in competition affect incumbents' voluntary disclosure choices. States implemented the IBBEA over several years and to varying degrees, allowing us to identify the effect of increased competition on the voluntary disclosure decisions of both public and private banks. We find that increases in competition are associated with increases in the level of voluntary disclosure. Specifically, we find an overall increase in press releases. Consistent with heightened incentives to communicate with investors, customers, and regulators, we document an increase in press releases containing forward-looking, product-related, and capital structure-related disclosures. Consistent with heightened incentives to communicate with competitors, we find that the tone of press releases becomes more negative after entry barriers are lowered.