Mandatory Financial Reporting and Voluntary Disclosure: Evidence from Mandatory IFRS Adoption
University of Pennsylvania - Accounting Department; University of Pennsylvania - The Wharton School
Temple University - Fox School of Business and Management
University of Pennsylvania - The Wharton School
September 29, 2013
This study examines the relation between mandatory reporting and voluntary disclosure and provides evidence on the underlying mechanisms by which these two constructs are related and the role of political institutions in shaping this relation. Using mandatory adoption of International Financial Reporting Standards (IFRS) as the setting, we document a net increase in the likelihood and frequency of management earnings forecasts around IFRS adoption for both common-law and code-law countries, consistent with existing theory that an increase in ex-post verification of disclosure through mandatory reports results in an increase in voluntary disclosure following IFRS adoption (Confirmatory Channel). Firms in code-law countries also experience an asymmetric increase in good- relative to bad-news disclosures, suggesting the presence of Strategic Influence in code-law countries wherein various stakeholders’ interests influence managers’ disclosure behavior.
Number of Pages in PDF File: 57
Keywords: Mandatory reporting, Voluntary disclosure, IFRS, Management forecasts, Political influence
JEL Classification: G14, G15, K22, M41working papers series
Date posted: November 7, 2012 ; Last revised: October 1, 2013
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