Labor Threats, Product Market Competition and Strategic Disclosures

I investigate the nature of strategic disclosure by managers facing labor related threats and product market competition from existing rivals. I test and find empirical support for extant theory that when a firm faces labor related threats and product market competition simultaneously, the additive forces of non-disclosure of good news weakens. In the face of competition and labor threats, the weakened incentive to hide good news may seem counterintuitive, but it helps managers to curtail aggressive bargaining by its employee base. I further contribute to literature by introducing three new measures of labor related threats. Using these new measures, I document that firms withhold good news when facing either labor threats or product market competition individually. But the joint presence of both entities weakens the incentives of firms to withhold good news, rather than strengthening it.