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Evidence That Management Discussion and Analysis (MD&A) is a Part of a Firm's Overall Disclosure Package

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  • PETER M. CLARKSON
  • JENNIFER L. KAO
  • GORDON D. RICHARDSON

Abstract

The objective of this study is to investigate the role, if any, that management discussion and analysis (MD&A) plays in a firm's disclosure package. First, we present evidence regarding the usefulness of MD&A. Our evidence is uniformly supportive of the view that MD&A is a source of new and useful information and indicates that MD&A is used for financial analysis purposes by at least one significant user group, sell†side analysts, who are members of the Toronto Society of Financial Analysts. We then provide evidence on disclosure quality. The results reveal that, overall, MD&A disclosure quality varies with disclosure stimuli similar to those found to influence disclosure choice in other disclosure channels. However, a more refined analysis of the MD&A subcomponents reveals that different factors influence disclosure quality for those subcomponents. Taken together, our results are consistent with the notion that MD&A is a part of a firm's overall disclosure package.

Suggested Citation

  • Peter M. Clarkson & Jennifer L. Kao & Gordon D. Richardson, 1999. "Evidence That Management Discussion and Analysis (MD&A) is a Part of a Firm's Overall Disclosure Package," Contemporary Accounting Research, John Wiley & Sons, vol. 16(1), pages 111-134, March.
    • Handle: RePEc:wly:coacre:v:16:y:1999:i:1:p:111-134
    DOI: 10.1111/j.1911-3846.1999.tb00576.x
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    References listed on IDEAS

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    1. Orie E. Barron & Charles O. Kile & Terrence B. O'Keefe, 1999. "MD&A Quality as Measured by the SEC and Analysts' Earnings Forecasts," Contemporary Accounting Research, John Wiley & Sons, vol. 16(1), pages 75-109, March.
    2. Lang, M & Lundholm, R, 1993. "Cross-Sectional Determinants Of Analyst Ratings Of Corporate Disclosures," Journal of Accounting Research, Wiley Blackwell, vol. 31(2), pages 246-271.
    3. Gibbins, M & Richardson, A & Waterhouse, J, 1990. "The Management Of Corporate Financial Disclosure - Opportunism, Ritualism, Policies, And Processes," Journal of Accounting Research, Wiley Blackwell, vol. 28(1), pages 121-143.
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    Cited by:

    1. Thomas Schleicher & Martin Walker, 2010. "Bias in the tone of forward‐looking narratives," Accounting and Business Research, Taylor & Francis Journals, vol. 40(4), pages 371-390.
    2. Elena Beccalli & Peter Miller & Ted O'leary, 2015. "How Analysts Process Information: Technical and Financial Disclosures in the Microprocessor Industry," European Accounting Review, Taylor & Francis Journals, vol. 24(3), pages 519-549, September.
    3. Mark Clatworthy & Michael Jones, 2003. "Financial reporting of good news and bad news: evidence from accounting narratives," Accounting and Business Research, Taylor & Francis Journals, vol. 33(3), pages 171-185.
    4. Alexandros Garefalakis & Nikolaos Sariannidis & Christos Lemonakis, 2020. "Operational elements of Narrative Disclosure Information (NDI) in a geographical context," Annals of Operations Research, Springer, vol. 294(1), pages 123-149, November.
    5. Beattie, Vivien, 2005. "Moving the financial accounting research front forward: the UK contribution," The British Accounting Review, Elsevier, vol. 37(1), pages 85-114.
    6. Bassett, Michael & Koh, Ping-Sheng & Tutticci, Irene, 2007. "The association between employee stock option disclosures and corporate governance: Evidence from an enhanced disclosure regime," The British Accounting Review, Elsevier, vol. 39(4), pages 303-322.
    7. Denise A. Jones, 2007. "Voluntary Disclosure in R&D†Intensive Industries," Contemporary Accounting Research, John Wiley & Sons, vol. 24(2), pages 489-522, June.
    8. Stephen V. Brown & Jennifer Wu Tucker, 2011. "Large‐Sample Evidence on Firms’ Year‐over‐Year MD&A Modifications," Journal of Accounting Research, Wiley Blackwell, vol. 49(2), pages 309-346, May.
    9. Wei Li, 2017. "Level of business insights in the MD&A and nonprofessional investors' judgments," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(4), pages 1043-1069, December.
    10. Oh, Frederick Dongchuhl & Shin, Donglim, 2020. "Religion and Corporate Disclosure Quality," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 61(1), pages 20-37, June.
    11. Lauren Cohen & Christopher Malloy & Quoc Nguyen, 2018. "Lazy Prices," NBER Working Papers 25084, National Bureau of Economic Research, Inc.
    12. Angela K. Davis & Jeremy M. Piger & Lisa M. Sedor, 2006. "Beyond the numbers: an analysis of optimistic and pessimistic language in earnings press releases," Working Papers 2006-005, Federal Reserve Bank of St. Louis.
    13. Luminita Enache & Khaled Hussainey, 2020. "The substitutive relation between voluntary disclosure and corporate governance in their effects on firm performance," Review of Quantitative Finance and Accounting, Springer, vol. 54(2), pages 413-445, February.
    14. Volkan Muslu & Suresh Radhakrishnan & K. R. Subramanyam & Dongkuk Lim, 2015. "Forward-Looking MD&A Disclosures and the Information Environment," Management Science, INFORMS, vol. 61(5), pages 931-948, May.
    15. Christine Wiedman, 2000. "Discussion of “Voluntary Disclosure and Equity Offerings: Reducing Information Asymmetry or Hyping the Stock?â€," Contemporary Accounting Research, John Wiley & Sons, vol. 17(4), pages 663-669, December.
    16. Le Wang & Xiaoyan Chen & Xing Li & Gaoliang Tian, 2021. "MD&A readability, auditor characteristics, and audit fees," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5025-5050, December.
    17. Thorsten Knauer & Andreas Wömpener, 2011. "Management Forecast Regulation and Practice in Germany – Firm and Auditor Perspectives," Accounting in Europe, Taylor & Francis Journals, vol. 8(2), pages 185-209.
    18. Dutta, Shantanu & Fuksa, Michel & Macaulay, Ken, 2019. "Determinants of MD&A sentiment in Canada," International Review of Economics & Finance, Elsevier, vol. 60(C), pages 130-148.
    19. Yuanyuan Hu & Shouming Chen & Jian Wang, 2018. "Managerial Humanistic Attention and CSR: Do Firm Characteristics Matter?," Sustainability, MDPI, vol. 10(11), pages 1-18, November.
    20. Shouming Chen & Kaidi Xu & Luu Thi Nguyen & Guangsheng Yu, 2018. "TMT’s Attention towards Financial Goals and Innovation Investment: Evidence from China," Sustainability, MDPI, vol. 10(11), pages 1-18, November.
    21. Schleicher, Thomas & Hussainey, Khaled & Walker, Martin, 2007. "Loss firms’ annual report narratives and share price anticipation of earnings," The British Accounting Review, Elsevier, vol. 39(2), pages 153-171.
    22. Mark H. Lang & Russell J. Lundholm, 2000. "Voluntary Disclosure and Equity Offerings: Reducing Information Asymmetry or Hyping the Stock?," Contemporary Accounting Research, John Wiley & Sons, vol. 17(4), pages 623-662, December.
    23. Peter Clarkson & Ami Lammerts Van Bueren & Julie Walker, 2006. "Chief executive officer remuneration disclosure quality: corporate responses to an evolving disclosure environment," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 46(5), pages 771-796, December.
    24. Christoph Mauritz & Martin Nienhaus & Christopher Oehler, 2023. "The role of individual audit partners for narrative disclosures," Review of Accounting Studies, Springer, vol. 28(1), pages 1-44, March.

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