The Financial Reporting Environment: Review of the Recent Literature
Stanford University - Graduate School of Business
Daniel A. Cohen
University of Texas at Dallas - Naveen Jindal School of Management
Thomas Z. Lys
Northwestern University - Kellogg School of Management
Beverly R. Walther
Northwestern University - Department of Accounting Information & Management
July 26, 2010
The corporate information environment develops endogenously as a consequence of information asymmetries and agency problems between investors, entrepreneurs, and managers. We provide a framework for analyzing the three main decisions that shape the corporate information environment in a capital markets setting: (1) managers’ voluntary reporting and disclosure decisions, (2) reporting and disclosures mandated by regulators, and (3) reporting decisions by third-party intermediaries (analysts). We review current research on disclosure regulation, information intermediaries, and the determinants and economic consequences of corporate disclosure and financial reporting decisions. We conclude that in the last ten years, research has generated a number of useful insights. Despite this progress, we call for researchers to consider interdependencies between the various decisions that shape the corporate information environment and highlight changes in the economic financial environment that raise new and interesting issues for researchers to address.
Number of Pages in PDF File: 150
Keywords: Financial Reporting, Information Environment, Disclosure, Analyst Forecasts
JEL Classification: D80, G12, G14, M41, M43
Date posted: October 6, 2009 ; Last revised: August 13, 2010
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