U. S. Corporate Reaction To GATT: An Analysis Of Managements Public Disclosures

Abstract

The authors performed a computerized search of recent public financial disclosures in Management Discussion and Analyses and Presidents Letters to Shareholders concerning the reaction of multinational firms to the General Agreement on Tariffs and Trade (GATT). The intent of the search was to explore 1) the extent of TAGG disclosures made by multinational firms, 2) the tenor of these disclosures (i.e., favorable, neutral or unfavorable), 3) the location of the GATT disclosure (i.e. the Management Discussion and Analysis or the Presidents Letter, and 4) the nature of the corporate response to GATT indicated by the disclosure. A total of 76 disclosures were examined and the majority were overwhelmingly favorable toward GATDD. These responses cited the general positive effect on their firm of increased world trade. Approximately ten percent of the firms with a favorable response to GATT discussed some specific strategic reaction such as a restructuring or increased international manufacturing. Favorable reactions to GATT were more likely to be found in the Presidents Letter, and negative or neutral reactions to GATT were more likely to be found in the Management Discussion and Analysis, perhaps due to the increased legal scrutiny given to the Management Discussion and Analysis. Negative and neutral GATT disclosures were mainly from the textile and agricultural sectors of the economy, and cited the negative effect of increased and/or unfair competition from imports.