This paper examines whether the level of voluntary disclosure affects the association between current returns and future earnings. Economic theory suggests that firms might find it advantageous to provide additional pieces of information (i.e. voluntary disclosure) to investors and analysts. Our results indicate that more voluntary disclosure does not improve the association between current returns and future earnings (i.e. current returns do not reflect more future earnings news). This finding raises the question of whether voluntary information in the annual report contains value-relevant information about future earnings or if investors are simply not capable of incorporating voluntary information in the firm value estimates. Copyright (c) 2007 The Authors. Journal compilation (c) 2007 AFAANZ.
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Article provided by Accounting and Finance Association of Australia and New Zealand in its journal Accounting & Finance.