Information Disclosure in the Presence of Competition: Evidence from the Pharmaceutical Industry

Abstract

This paper studies how competition impacts firms' voluntary disclosure of product quality information. Our empirical context is the pharmaceutical industry, where firms must decide whether to disclose drug quality information that is acquired in clinical trials. Leveraging variation in clinical trial sponsorship and a difference-in-differences design, we show that firms in competitive markets are less likely to publicly disclose clinical trial results. In exploring mechanisms, we find evidence for a decline in product quality as driving these findings. These results suggest that market structure plays an important role in shaping the production and provision of product quality information.