Voluntary Disclosure of Cash Flow Statements and Segment Data in Germany

This paper studies the incentives of German firms to voluntarily disclose cash flow statements and segment reports in the annual report. Internationally, both statements are considered important elements of financial reporting. In Germany, however, their disclosure has not been mandatory until recent legislation was introduced. This situation provides an opportunity to study the determinants of two distinct types of voluntary disclosures. While segment reports are viewed as revealing proprietary information, cash flow statements are generally considered less proprietary in nature. Given the differences between the two statements, we expect that each disclosure has different determinants. This study generally supports this conjecture. Furthermore, our results are generally consistent with more specific hypotheses derived from extant analytical models. We find that the disclosure of cash flow statements seems to be primarily governed by cost savings in private information acquisition while the disclosure of segment reports appear to be governed by proprietary costs. These findings suggest that seemingly competing disclosure theories put forth in the literature may apply to different types of information and that one has to be careful to create disclosure indices across distinct types of disclosures.