Discretionary disclosure

Evolutionary Model of Existing Competition and Voluntary Disclosure

“…Botosan and Harris, 2000 Cohen, 2002Ettredge et al, 2002Leuz, 2004Graham et al, 2005Jin , 2005 Botosan and Stanfod, 2005 Shin 2002 Verrecchia and Weber, 2006 Nichols and Street, 2007Berger and Hann, 2007Dedman and Lennox, 2009Heitzman et al, 2010Ali et al, 2009 Supports the hypothesis Rejects the hypothesis Verrecchia, 1983Mautz, 1968 Hypothesis:…”

“…Since "Proprietary Costs", when produced by the competition, was the first intuition that linked both variables, the central circle represents this hypothesis (Backer and McFarland, 1968;Mautz, 1968), that is, the negative relationship between competition and voluntary disclosure (Verrecchia, 1983). We divide the figure into three sets of papers: theoretical papers are gathered on the lower right, econometric tests on the left, and surveys or interviews on the upper right.…”

“…However, there are two groups of articles which are the cornerstones of this research. First of all, the four papers in bold in Figure 1 (and later included afterwards in Figure 2): three are theoretical (Verrecchia, 1983;Darrough and Stoughton, 1990;Clich and Verrecchia, 1997) and one is a test (Harris, 1998). In a static context, these four papers could all seem to be against.…”

“…Competition is minimal, but releasing private news can eliminate these extra profits since it is the only source of information. Under these conditions, producers need to protect meaningful information, and this quickly reduces the probability of their releasing private information as a consequence of high proprietary costs (Verrecchia, 1983).…”

“…The strategic importance of private information (Verrecchia, 1983), the necessity of informing rivals to avoid overproduction (Darrough and Stoughton, 1990), and the ability of competitors to forecast relevant information (Backer and McFarland, 1968) are the factors that modulate the sign of the slope between competition and voluntary disclosure. The successive changes in intensity of these strengths throughout a industry's lifetime produce a non-monotonic function.…”