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On the Relationship between Voluntary Disclosure, Earnings Smoothing and the Value-Relevance of Earnings: The Case of Switzerland


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  • Pascale Lapointe-Antunes
  • Denis Cormier
  • Michel Magnan
  • Sophie Gay-Angers


This paper examines whether voluntary disclosure by Swiss firms constrains the use of discretionary accruals to smooth earnings, and explores the effect of voluntary disclosure on the value relevance of earnings. We focus on Swiss firms because Switzerland's financial reporting system provides managers with extensive discretion in corporate disclosure, and there are important variations in the level of information provided in their annual reports. We consider that managers can choose two different ways to voluntarily convey information, either through the quality and quantity of annual report disclosure or, through compliance with International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) or US Generally Accepted Accounting Principles (GAAP). Relying on a simultaneous equations approach, our results suggest that Swiss firms use discretionary accruals to smooth earnings. However, this relation is reduced for firms that voluntarily disclose more information in their annual report or comply with IAS/IFRS or US GAAP. Moreover, we show that discretionary accruals of high disclosers or of firms voluntarily complying with IAS/IFRS or US GAAP receive a lower valuation weight.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal European Accounting Review.

Volume (Year): 15 (2006)
Issue (Month): 4 ()
Pages: 465-505

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Handle: RePEc:taf:euract:v:15:y:2006:i:4:p:465-505

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Cited by:
  1. Samira Demaria & Denis Cormier & Robert Teller, 2008. "Incidence des choix d'exemptions comptables sur la valorisation boursière des sociétés françaises lors de la première application du référentiel IFRS," Post-Print halshs-00266117, HAL.


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