Voluntary Disclosure of Accounting Information for Product Warranty Liability

Posted: 9 Nov 1998

See all articles by Feng Gu

Feng Gu

State University of New York at Buffalo

Date Written: August 1998

Abstract

This paper investigates factors that are associated with management decisions to disclose warranty information voluntarily. First, I find that firms with lower warranty liabilities are more likely to disclose the information. Second, firms whose warranty provisions are lower than other firms with similar warranty liabilities or lower than what their own warranty liabilities would imply choose to disclose the provision amount. Third, firms which disclose warranty liabilities voluntarily are characterized by less volatile time-series of warranty liabilities. The evidence supports the notion that the benefits from signaling good news exceed potential proprietary costs from adverse reactions of consumers or from competitors' responses.

JEL Classification: M41, M45

Suggested Citation

Gu, Feng, Voluntary Disclosure of Accounting Information for Product Warranty Liability (August 1998). Available at SSRN: https://ssrn.com/abstract=137436

Feng Gu (Contact Author)

State University of New York at Buffalo ( email )

12 Capen Hall
School of Management
Buffalo, NY 14221

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