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Are voluntary disclosures that disavow the reliability of mandated fair value information informative or opportunistic?

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  • Blacconiere, Walter G.
  • Frederickson, James R.
  • Johnson, Marilyn F.
  • Lewis, Melissa F.

Abstract

One consequence of the shift to fair value measurement is the emergence of voluntary disclosures in audited financial statements that question the reliability of mandated fair value information. We refer to these disclosures as reliability disavowals. We examine stock option volatility estimates disclosed under SFAS 123 and test whether disavowals are informative (opportunistic) by examining whether ex ante firm characteristics, forecast bias, and prediction difficulty are consistent with informative (opportunistic) disclosure. Our results support the hypothesis that disavowals inform users about the reliability of volatility estimates, but there is also limited evidence consistent with managers using disavowals opportunistically.

Suggested Citation

  • Blacconiere, Walter G. & Frederickson, James R. & Johnson, Marilyn F. & Lewis, Melissa F., 2011. "Are voluntary disclosures that disavow the reliability of mandated fair value information informative or opportunistic?," Journal of Accounting and Economics, Elsevier, vol. 52(2), pages 235-251.
    • Handle: RePEc:eee:jaecon:v:52:y:2011:i:2:p:235-251
    DOI: 10.1016/j.jacceco.2011.09.002
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    Cited by:

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    3. Cai, Ye & Kim, Yongtae & Park, Jong Chool & White, Hal D., 2016. "Common auditors in M&A transactions," Journal of Accounting and Economics, Elsevier, vol. 61(1), pages 77-99.
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    6. Yiwei Dou & M. H. Franco Wong & Baohua Xin, 2019. "The Effect of Financial Reporting Quality on Corporate Investment Efficiency: Evidence from the Adoption of SFAS No. 123R," Management Science, INFORMS, vol. 67(5), pages 2249-2266, May.

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    More about this item

    Keywords

    Fair value; Disclosure; Informative; Opportunistic; Reliability; Stock options;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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