Naughty Firms, Noisy Disclosure

We empirically study how collusion in the product markets affects firms’ financial disclosure strategies. By exploiting exogenous variations to the costs of illegal pricefixing, we find that U.S. firms start sharing more detailed information in their financial disclosure about their customers, contracts, and products, potentially benefiting peers and helping to tacitly coordinate actions in product markets. At the same time, the disclosure on firms’ competitive environment, which might benefit antitrust regulators, becomes more murky. Our findings suggest that transparency in financial statements can come at the expense of consumer welfare.