Does Global Outsourcing Affect Corporate Customers’ Voluntary Disclosures?

Global outsourcing has become an economic imperative for many major corporations worldwide, but at the same time, it has brought substantial risks and uncertainties to these firms. In this study, we examine whether global sourcing of goods or services shapes U.S. corporate disclosure policies. Our main results indicate a negative relation between global outsourcing and voluntary disclosure. Further, identification tests show that managers reduce voluntary disclosures when they first outsource their inputs globally and when suppliers’ countries experience spikes in trade uncertainty and political risks. The global outsourcing effect on disclosure is stronger when corporate customers face a higher litigation risk, when there is less information transfer between customers and suppliers, and when customers are in more competitive product markets. Collectively, these results suggest that corporate customers decrease voluntary disclosures due to increased uncertainties along the global supply chain.