Biased Voluntary Disclosure
Tel Aviv University - Faculty of Management
Columbia Business School
July 3, 2011
Review of Accounting Studies, Forthcoming
We provide a bridge between the voluntary disclosure and the earnings management literature. Voluntary disclosure models focus on managers’ discretion in deciding whether or not to provide truthful voluntary disclosure to the capital market. Earnings management models, on the other hand, concentrate on managers’ discretion in deciding how to bias their mandatory disclosure. By analyzing managers’ disclosure strategy when disclosure is voluntary and not necessarily truthful, we show the robustness of voluntary disclosure theory to the relaxation of the standard assumption of truthful reporting. We also demonstrate the sensitivity of earnings management theory to the commonly made mandatory disclosure assumption.
Number of Pages in PDF File: 39
Keywords: Financial Accounting, Asymmetric Information, Voluntary Disclosure, Reporting Bias, Earnings Management
JEL Classification: D82, G14, M41, M43Accepted Paper Series
Date posted: July 6, 2011
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