Discussion of 'Is the Risk of Product Market Predation a Cost of Disclosure?'

Bernard (2016) proposes that financially constrained firms susceptible to “product market predation” are more likely to avoid complying with a mandatory requirement to publicly disclose financial statements. Bernard tests and finds that financially constrained private firms in Germany are less likely to disclose their financial statements despite being subject to a law requiring them to do so and interprets this evidence as consistent with predation risk affecting firms' disclosure decisions. I discuss how Bernard's findings advance our understanding of the incentives and disincentives for disclosure. I evaluate the theoretical rationale – i.e., product market predation – as the motive for non-disclosure as well as the strengths and weaknesses of his empirical analyses. My discussion highlights the implications of these findings for disclosure regulation, especially as it relates to small private firms. I end my discussion with suggestions for future research, including ideas to use the empirical setting identified by Bernard for answering other research questions