Financial Reporting Quality and Proprietary Costs
39 Pages Posted: 8 Oct 2008
Date Written: June 2002
This study investigates the association between proprietary costs and the quality offinancial reporting. Interpreting a firmâ¬"s financial reporting policy as a choice ofprecision (â¬Squalityâ¬?) for the disclosed accounting earnings, I find evidence that the higher the proprietary costs, the lower the precision (â¬Squalityâ¬?) of reported accounting earnings. This is consistent with analytical work in disclosure theory which suggests that, ceteris paribus, as the proprietary cost of disclosure increases, the quality of disclosure decreases.
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