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Motives for disclosure and non-disclosure: a framework and review of the evidence

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  • Russell Lundholm
  • Matt Van Winkle

Abstract

We develop und utilise a theoretical framework for the purpose of summarising the existing empirical work in the voluntary disclosure area. This theoretical framework posits that the primary goal of voluntary disclosure is reduction of information asymmetry (between managers and investors) and thereby cost of capital. We start with a basic or frictionless market where firms choose to disclose all news except worst possible outcomes. The literature supporting this basic economic setting is then discussed. The bulk of our review discusses results that describe disclosure outcomes when frictions do exist. We organise the empirical findings around three categories of frictions: management a) does not know of any information to disclose, b) can not tell information without incurring a cost, or c) does not care about their firm's current stock price.

Suggested Citation

  • Russell Lundholm & Matt Van Winkle, 2006. "Motives for disclosure and non-disclosure: a framework and review of the evidence," Accounting and Business Research, Taylor & Francis Journals, vol. 36(S1), pages 43-48.
    • Handle: RePEc:taf:acctbr:v:36:y:2006:i:s1:p:43-48
    DOI: 10.1080/00014788.2006.9730044
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    Cited by:

    1. Boesso, Giacomo & Kumar, Kamalesh, 2009. "Stakeholder prioritization and reporting: Evidence from Italy and the US," Accounting forum, Elsevier, vol. 33(2), pages 162-175.
    2. Vasiliki Athanasakou & Khaled Hussainey, 2014. "The perceived credibility of forward-looking performance disclosures," Accounting and Business Research, Taylor & Francis Journals, vol. 44(3), pages 227-259, June.
    3. Encarna Guillamón-Saorín & Carlos M. P. Sousa, 2014. "Voluntary Disclosure of Press Releases and the Importance of Timing: A Comparative Study of the UK and Spain," Management International Review, Springer, vol. 54(1), pages 71-106, February.
    4. Armitage, Seth & Marston, Claire, 2008. "Corporate disclosure, cost of capital and reputation: Evidence from finance directors," The British Accounting Review, Elsevier, vol. 40(4), pages 314-336.
    5. Brennan, Niamh M. & Edgar, Victoria C. & Power, Sean Bradley, 2022. "COVID-19 profit warnings: Delivering bad news in a time of crisis," The British Accounting Review, Elsevier, vol. 54(2).
    6. Jing Wang & Huilan Zhang, 2022. "Political transparency, corporate governance and economic significance," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(1), pages 49-66, March.
    7. Mohamed Ali Boujelbene & Habib Affes, 2013. "Perceptions Du Capital Intellectuel Par Les Managers Etude Empirique Dans Le Contexte Tunisien," Post-Print hal-00991699, HAL.
    8. Nixon Oluoch Omoro, 2020. "Top Management Team Diversity and the moderating effect of Discretionary Accounting Choices on Financial Reporting Quality among Commercial State Corporations in Kenya," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 8(2), pages 79-89.
    9. Mousa, Gehan A. & Elamir, Elsayed A.H. & Hussainey, Khaled, 2022. "The effect of annual report narratives on the cost of capital in the Middle East and North Africa: A machine learning approach," Research in International Business and Finance, Elsevier, vol. 62(C).
    10. Thomas D?Angelo & Marco Lam & Samir El-Gazzar & Rudolph Jacob, 2022. "GAAP-compliant versus non-GAAP voluntary disclosures relative to critical reporting dates," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2022(1), pages 5-40.
    11. Lionel Escaffre & Olivier J. Ramond, 2007. "Toward an understanding of the IAS 39 derecognition principles: An application to the factoring transactions' reporting," Post-Print hal-00769383, HAL.
    12. Mohammed S. Albarrak & Ngan Duong Cao & Aly Salama & Abdullah A. Aljughaiman, 2023. "Twitter carbon information and cost of equity: the moderating role of environmental performance," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(3), pages 693-718, September.

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