Customer referencing is a strategy that firms can use to disclose their connections with reputable customers as a means of enhancing their own reputations. We study the capital market benefits of naming reputable nonmajor customers in firms' financial reports to provide empirical evidence on whether this form of customer referencing has important practical implications. We predict and find that firms enjoy a lower cost of equity when they engage in customer referencing in their financial reports, consistent with the argument that this form of voluntary disclosure increases investor attention and customer certification. In cross‐sectional analyses, we predict and find that the benefits of customer referencing are more pronounced for firms that (1) lack major customers or reputable major customers, (2) name customers whose reputations exceed their own, and (3) face higher competition. Overall, our study provides evidence that communicating certain interorganizational connections can generate capital market benefits for disclosing firms.

We exploit the staggered recognition of the Inevitable Disclosure Doctrine (IDD) by U.S. state courts to examine the effect of trade secret protection on the amount of firm-specific information incorporated in stock prices, as reflected in stock price synchronicity. We find that after certain state courts recognize the IDD, firms headquartered in those states exhibit a significant increase in stock price synchronicity relative to firms in other states. We also find a significant decrease in the disclosure of proprietary information in the firms' 10-K reports. These results suggest that IDD recognition increases the proprietary cost of disclosure and, in response, corporate managers withhold more information. In addition, we find that the increase in stock price synchronicity and the decrease in the disclosure of proprietary information lead to increases in the firm's market share, cost of equity, and market-to-book ratio, suggesting that managers sacrifice capital market benefits for product market gains. Data Availability: Data used in this study are available from public sources identified in the study.

Prior studies provide conflicting evidence as to whether managers have a general tendency to disclose or withhold bad news. A key challenge for this literature is that researchers cannot observe the negative private information that managers possess. We tackle this challenge by constructing a proxy for managers' private bad news (residual short interest) and then perform a series of tests to validate this proxy. Using management earnings guidance and 8-K filings as measures of voluntary disclosure, we find a negative relation between bad-news disclosure and residual short interest, suggesting that managers withhold bad news in general. This tendency is tempered when firms are exposed to higher litigation risk, and it is strengthened when managers have greater incentives to support the stock price. Based on a novel approach to identifying the presence of bad news, our study adds to the debate on whether managers tend to withhold or release bad news. Data Availability: Data used in this study are available from public sources identified in the study.