Voluntary Disclosure of Partially Verifiable Information

Korn, Evelyn

doi:10.1007/bf03396690

Cited by 22 publications

(12 citation statements)

References 14 publications

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“…Costly state falsification models. In contrast to mandatory disclosure settings, costly reporting distortions have largely been left unexplored in voluntary disclosure settings (with the exception of Korn, 2004;Beyer and Guttman, 2010;Einhorn and Ziv, 2010). 26 Costly state falsification models assume that while disclosures do not have to be truthful, reporting distortions are costly to managers.…”

Section: Non-verifiable Disclosurementioning

confidence: 97%

The financial reporting environment: Review of the recent literature

Beyer

Cohen

Lys

et al. 2010

Journal of Accounting and Economics

1,924

328

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Section: Non-verifiable Disclosurementioning

confidence: 97%

The financial reporting environment: Review of the recent literature

Beyer

Cohen

Lys

et al. 2010

Journal of Accounting and Economics

1,924

328

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“…While the …rm in Fischer and Verrecchia (2000) always discloses, Korn (2004), Kwon, Newman, andZang (2009), andEinhorn andZiv (2012) study settings where a single …rm decides whether to disclose potentially biased information. In these settings, the …rm withholds su¢ ciently bad news and, conditional on disclosure, the market can perfectly back out any bias because it is informed about the …rm's incentives.…”

Section: Introductionmentioning

confidence: 99%

“…In these settings, the …rm withholds su¢ ciently bad news and, conditional on disclosure, the market can perfectly back out any bias because it is informed about the …rm's incentives. Korn (2004) …nds that as the cost of biasing becomes very low (very high) a no-disclosure equilibrium arises (a truthful, full-disclosure equilibrium arises). Because …rm values are drawn from a …nite interval, a partly separating equilibrium exists for some costs of misreporting where …rms with low …rm values do not disclose, …rms with intermediate values disclose biased reports, and …rms with high values disclose the upper threshold.…”

Section: Introductionmentioning

confidence: 99%

Bias and the Commitment to Disclosure

Heinle

Verrecchia

2016

Management Science

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This paper studies the propensity of firms to commit to disclose information that is subsequently biased, in the presence of other firms also issuing potentially biased information. An important aspect of such an analysis is the fact that firms can choose whether to disclose or withhold information. We show that allowing the number of disclosed reports to be endogenous introduces a countervailing force to some of the empirical predictions from the prior literature. For example, we find that as more firms issue reports or as the correlation across firms' cash flows increases, the firm biases its report less. However, when we treat firms' disclosure choices as endogenous, we show that the number of firms that commit to disclose decreases as the correlation across these cash flows increases, and this, in turn, offsets the direct effect of the correlation on bias. AbstractThis paper studies the propensity of …rms to commit to disclose information that is subsequently biased, in the presence of other …rms also issuing potentially biased information. An important aspect of such an analysis is the fact that …rms can choose whether to disclose or withhold information. We show that allowing the number of disclosed reports to be endogenous introduces a countervailing force to some of the empirical predictions from the prior literature. For example, we …nd that as more …rms issue a report or as the correlation across …rms' cash ‡ows increases, the …rm biases its report less. However, when we treat …rms' disclosure choices as endogenous, we show that the number of …rms that commit to disclose decreases as the correlation across these cash ‡ows increases, and this, in turn, o¤sets the direct e¤ect of the correlation on bias.

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“…essentially consists of a permanent and a transitory component, and we endow the manager with better information about the mix. 3 Specifically, we assume that the manager knows the variance of an item in the firm's financial reports and selects a voluntary disclosure 1 See, for example, the foundational work by Verrecchia [1983Verrecchia [ , 1990, Dye [1985], and Jung and Kwon [1988] or the more recent work by Dye [1998], Fischer and Stocken [2001], Dutta and Trueman [2002], Korn and Schiller [2003], Korn [2004], and Einhorn [2005]. Verrecchia [2001] and Dye [2001] provide an excellent survey and discussion of the voluntary disclosure literature.…”

Section: Introductionmentioning

confidence: 99%

Financial Reporting and Supplemental Voluntary Disclosures

Bagnoli

Watts

2007

J of Accounting Research

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A standard result in the voluntary disclosure literature is that when the manager's private information is a signal correlated with the firm's liquidation value, mandatory disclosures substitute for voluntary disclosures. In this paper, we assume that the manager's private information complements the mandatory disclosure and show that the content and likelihood of a voluntary disclosure depend on whether the mandatory reports contain good or bad news. This different information asymmetry produces new, testable implications regarding the probability of and market reaction to voluntary disclosures. We also show that changes in mandatory disclosure regulations can have unintended consequences due to their effects on the manager's willingness to voluntarily provide supplemental disclosures. * Purdue University; †Purdue University. We thank the Editor and two anonymous referees for many helpful comments and suggestions. We also appreciate the comments and suggestions we received from

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Voluntary Disclosure of Partially Verifiable Information

Cited by 22 publications

References 14 publications

The financial reporting environment: Review of the recent literature

The financial reporting environment: Review of the recent literature

Bias and the Commitment to Disclosure

Financial Reporting and Supplemental Voluntary Disclosures

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