Copycat Skills and Disclosure Costs

Despite the benefits of greater transparency, public disclosures may reveal proprietary information that ultimately harms the disclosing firm by allowing competitors to view and imitate its strategies, an activity known as “copycatting.” An SEC proposal in July 2020 to increase the reporting threshold for the quarterly 13F holdings of investment companies from $100 million to $3.5 billion was partly aimed at reducing the costs from copycatting. Although prior studies have shown how proprietary costs and competition shape the decisions of disclosing firms (e.g., Leuz and Wysocki, 2016),  copycatting by peers remains relatively unexplored, mainly because such behavior is so difficult … Read more