Financial Reporting and Supplemental Voluntary Disclosures
AbstractABSTRACT A standard result in the voluntary disclosure literature is that when the manager's private information is a signal correlated with the firm's liquidation value, mandatory disclosures substitute for voluntary disclosures. In this paper, we assume that the manager's private information complements the mandatory disclosure and show that the content and likelihood of a voluntary disclosure depend on whether the mandatory reports contain good or bad news. This different information asymmetry produces new, testable implications regarding the probability of and market reaction to voluntary disclosures. We also show that changes in mandatory disclosure regulations can have unintended consequences due to their effects on the manager's willingness to voluntarily provide supplemental disclosures. Copyright University of Chicago on behalf of the Institute of Professional Accounting, 2007.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Accounting Research.
Volume (Year): 45 (2007)
Issue (Month): 5 (December)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0021-8456
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- Ball, Ray & Jayaraman, Sudarshan & Shivakumar, Lakshmanan, 2012. "Audited financial reporting and voluntary disclosure as complements: A test of the Confirmation Hypothesis," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 136-166.
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