Abstract

http://ssrn.com/abstract=1879804
 


 



Voluntary Disclosure Quality, Operating Performance, and Stock Market Valuations


Florian Eugster


Stockholm School of Economics

Alexander F. Wagner


University of Zurich - Department of Banking and Finance; Harvard University; Swiss Finance Institute; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

September 13, 2013

Swiss Finance Institute Research Paper No. 11-25

Abstract:     
We document that firms with better voluntary disclosure quality VDQ have better operating performance and exhibit higher valuation ratios. These results hold controlling for firm fixed effects as well as with two instrumental variables approaches. Thus, the evidence provides support for the hypothesis that VDQ is causally linked to value generation, adding to the previously established effects of information transmission that occur when managers use more extensive disclosure to convey privately known good news about future firm results. In addition, VDQ and excess returns (beyond those available through passively investing in popular styles) are slightly positively related in the full sample, suggesting that stock prices do not fully incorporate the value of higher disclosure quality. Here, the analysis adds to existing work by showing that, consistent with mispricing, the positive relation between VDQ and excess returns is driven by those firms for which previous literature has shown that equity prices are relatively slow to reflect new information.

Number of Pages in PDF File: 39

Keywords: Voluntary disclosure quality, portfolio analysis, value reporting, disclosure

JEL Classification: G11, G14, G30, M41

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Date posted: July 6, 2011 ; Last revised: January 23, 2014

Suggested Citation

Eugster, Florian and Wagner, Alexander F., Voluntary Disclosure Quality, Operating Performance, and Stock Market Valuations (September 13, 2013). Swiss Finance Institute Research Paper No. 11-25. Available at SSRN: http://ssrn.com/abstract=1879804 or http://dx.doi.org/10.2139/ssrn.1879804

Contact Information

Florian Eugster
Stockholm School of Economics ( email )
PO Box 6501
Stockholm, 11383
Sweden
Alexander F. Wagner (Contact Author)
University of Zurich - Department of Banking and Finance ( email )
Plattenstrasse 14
Zürich, 8032
Switzerland
+41 44 634 3963 (Phone)
Harvard University ( email )
1875 Cambridge Street
Cambridge, MA 02138
United States
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland
HOME PAGE: http://www.alex-wagner.com

Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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