IDEAS home Printed from https://ideas.repec.org/a/bla/jbfnac/v32y2005i7-8p1423-1435.html
   My bibliography  Save this article

Voluntary Disclosure of Bad News

Author

Listed:
  • Jeroen Suijs

Abstract

This paper shows that in a voluntary disclosure environment entailing both a fixed disclosure cost and a variable proprietary cost, partial disclosure equilibria may arise in which firms voluntarily disclose bad private information to the public. Furthermore, it is shown that such equilibria may arise more frequently as the threat of incuring proprietary cost increases and/or the proprietary cost itself increases.

Suggested Citation

  • Jeroen Suijs, 2005. "Voluntary Disclosure of Bad News," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7‐8), pages 1423-1435, September.
    • Handle: RePEc:bla:jbfnac:v:32:y:2005:i:7-8:p:1423-1435
    DOI: 10.1111/j.0306-686X.2005.00634.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.0306-686X.2005.00634.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.0306-686X.2005.00634.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Skinner, Dj, 1994. "Why Firms Voluntarily Disclose Bad-News," Journal of Accounting Research, Wiley Blackwell, vol. 32(1), pages 38-60.
    2. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-483, December.
    3. Verrecchia, Robert E., 2001. "Essays on disclosure," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 97-180, December.
    4. Boyan Jovanovic, 1982. "Truthful Disclosure of Information," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 36-44, Spring.
    5. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
    6. Verrecchia, Robert E., 1983. "Discretionary disclosure," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 179-194, April.
    7. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
    8. Wagenhofer, Alfred, 1990. "Voluntary disclosure with a strategic opponent," Journal of Accounting and Economics, Elsevier, vol. 12(4), pages 341-363, March.
    9. Darrough, Masako N. & Stoughton, Neal M., 1990. "Financial disclosure policy in an entry game," Journal of Accounting and Economics, Elsevier, vol. 12(1-3), pages 219-243, January.
    10. Dye, Ronald A., 2001. "An evaluation of "essays on disclosure" and the disclosure literature in accounting," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 181-235, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Christiane Pott & Theodore Mock & Christoph Watrin, 2008. "The effect of a transparency report on auditor independence: practitioners’ self-assessment," Review of Managerial Science, Springer, vol. 2(2), pages 111-127, July.
    2. Jeremy Bertomeu & Igor Vaysman & Wenjie Xue, 2021. "Voluntary versus mandatory disclosure," Review of Accounting Studies, Springer, vol. 26(2), pages 658-692, June.
    3. Hao-Chang Sung & Chunsheng Yuan, 2017. "Biased Voluntary Disclosure, Earnings Target, And Product Market Competition," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 12(03), pages 1-20, September.
    4. Tuo, Ling & Rezaee, Zabihollah & Gao, Lei, 2024. "Is there a tradeoff between management earnings forecasts and sustainability reporting?," Global Finance Journal, Elsevier, vol. 59(C).
    5. Stephan Hollander & Maarten Pronk & Erik Roelofsen, 2010. "Does Silence Speak? An Empirical Analysis of Disclosure Choices During Conference Calls," Journal of Accounting Research, Wiley Blackwell, vol. 48(3), pages 531-563, June.
    6. Konrad Lang, 2018. "Voluntary Disclosure and Analyst Forecast," European Accounting Review, Taylor & Francis Journals, vol. 27(1), pages 23-36, January.
    7. Likittanawong Supawat & Leemakdej Arnat, 2023. "Market Reaction to Corporate Releases and News Articles: Evidence from Thailand’s Stock Market," IJFS, MDPI, vol. 11(3), pages 1-27, September.
    8. Her‐Jiun Sheu & Huimin Chung & Chih‐Liang Liu, 2010. "Comprehensive Disclosure of Compensation and Firm Value: The Case of Policy Reforms in an Emerging Market," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(9‐10), pages 1115-1144, November.
    9. Beyer, Anne & Cohen, Daniel A. & Lys, Thomas Z. & Walther, Beverly R., 2010. "The financial reporting environment: Review of the recent literature," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 296-343, December.
    10. Chung, Huimin & Judge, William Q. & Li, Yi-Hua, 2015. "Voluntary disclosure, excess executive compensation, and firm value," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 64-90.
    11. Walter P. Mkumbuzi, 2016. "Influence of Intellectual Capital Investment, Risk, Industry Membership and Corporate Governance Mechanisms on the Voluntary Disclosure of Intellectual Capital by UK Listed Companies," Asian Social Science, Canadian Center of Science and Education, vol. 12(1), pages 42-74, January.
    12. Michael D. Pfarrer & Ken G. Smith & Kathryn M. Bartol & Dmitry M. Khanin & Xiaomeng Zhang, 2008. "Coming Forward: The Effects of Social and Regulatory Forces on the Voluntary Restatement of Earnings Subsequent to Wrongdoing," Organization Science, INFORMS, vol. 19(3), pages 386-403, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Beyer, Anne & Cohen, Daniel A. & Lys, Thomas Z. & Walther, Beverly R., 2010. "The financial reporting environment: Review of the recent literature," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 296-343, December.
    2. Einhorn, Eti, 2007. "Voluntary disclosure under uncertainty about the reporting objective," Journal of Accounting and Economics, Elsevier, vol. 43(2-3), pages 245-274, July.
    3. Daniel Aobdia, 2018. "Employee mobility, noncompete agreements, product-market competition, and company disclosure," Review of Accounting Studies, Springer, vol. 23(1), pages 296-346, March.
    4. Jesse A. Ellis & C. Edward Fee & Shawn E. Thomas, 2012. "Proprietary Costs and the Disclosure of Information About Customers," Journal of Accounting Research, Wiley Blackwell, vol. 50(3), pages 685-727, June.
    5. Kumar, Praveen & Langberg, Nisan & Oded, Jacob & Sivaramakrishnan, K., 2017. "Voluntary disclosure and strategic stock repurchases," Journal of Accounting and Economics, Elsevier, vol. 63(2), pages 207-230.
    6. Konrad Lang, 2018. "Voluntary Disclosure and Analyst Forecast," European Accounting Review, Taylor & Francis Journals, vol. 27(1), pages 23-36, January.
    7. Suijs, Jeroen, 2007. "Voluntary disclosure of information when firms are uncertain of investor response," Journal of Accounting and Economics, Elsevier, vol. 43(2-3), pages 391-410, July.
    8. Verrecchia, Robert E., 2001. "Essays on disclosure," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 97-180, December.
    9. Luminita Enache & Antonio Parbonetti & Anup Srivastava, 2020. "Are all outside directors created equal with respect to firm disclosure policy?," Review of Quantitative Finance and Accounting, Springer, vol. 55(2), pages 541-577, August.
    10. Imhof, Michael J & Seavey, Scott E., 2018. "How investors value cash and cash flows when managers commit to providing earnings forecasts," Advances in accounting, Elsevier, vol. 41(C), pages 74-87.
    11. Hirshleifer, David & Lim, Sonya S. & Teoh, Siew Hong, 2004. "Disclosure to a Credulous Audience: The Role of Limited Attention," MPRA Paper 5198, University Library of Munich, Germany.
    12. E. Cheynel & M. Liu-Watts, 2020. "A simple structural estimator of disclosure costs," Review of Accounting Studies, Springer, vol. 25(1), pages 201-245, March.
    13. Xiong, Yan & Jiang, Xu, 2022. "Economic consequences of managerial compensation contract disclosure," Journal of Accounting and Economics, Elsevier, vol. 73(2).
    14. Stephan Hollander & Maarten Pronk & Erik Roelofsen, 2010. "Does Silence Speak? An Empirical Analysis of Disclosure Choices During Conference Calls," Journal of Accounting Research, Wiley Blackwell, vol. 48(3), pages 531-563, June.
    15. Thakor, Anjan V., 2015. "Strategic information disclosure when there is fundamental disagreement," Journal of Financial Intermediation, Elsevier, vol. 24(2), pages 131-153.
    16. Suijs, J.P.M., 1999. "Costly Disclosures in a Voluntary Disclosure Model with an Opponent," Discussion Paper 1999-35, Tilburg University, Center for Economic Research.
    17. Greg Clinch & Robert E. Verrecchia, 1997. "Competitive Disadvantage and Discretionary Disclosure in Industries," Australian Journal of Management, Australian School of Business, vol. 22(2), pages 125-137, December.
    18. Bruce Ian Carlin & Shaun William Davies & Andrew Miles Iannaccone, 2010. "Competing for Attention in Financial Markets," NBER Working Papers 16085, National Bureau of Economic Research, Inc.
    19. Anil Arya & Hans Frimor & Brian Mittendorf, 2010. "Discretionary Disclosure of Proprietary Information in a Multisegment Firm," Management Science, INFORMS, vol. 56(4), pages 645-658, April.
    20. Janice Hollindale & Pamela Kent & Xin Qu, 2022. "Proprietary costs and the choice of hard and soft greenhouse gas emissions’ disclosure," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3837-3873, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jbfnac:v:32:y:2005:i:7-8:p:1423-1435. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.