Strategic Disclosure Incentives in a Multisegment Firm

ABSTRACT This paper presents a unifying model of disclosure in the presence of competitors and supply market reliance to examine the role of multisegment operations on disclosure choice. A firm’s private information can have varying demand implications for its own portfolio of segments and for its competitors’ portfolios of segments. In multisegment firms, cross-firm spillovers of information discourage disclosure whereas cross-segment spillovers encourage disclosure. This suggests multisegment firms with more informationally diverse segments will have more incentives for transparency. Further, in multisegment firms, reliance on an imperfect supply market has less detrimental effects on transparency compared to single-segment firms. Supply market reliance is less detrimental for multisegment firms with a more diverse portfolio of segments. The results suggest that multisegment firms have more incentives for transparency relative to single-segment firms. JEL Classifications: L11; L13; M41.