Do Major Customers Influence Voluntary Corporate Disclosure?

46 Pages Posted: 1 Sep 2013

See all articles by Jian Cao

Jian Cao

Florida Atlantic University

Hsin-Yi (Shirley) Hsieh

Florida Atlantic University

Mark J. Kohlbeck

Florida Atlantic University - School of Accounting

Date Written: August 30, 2013

Abstract

Prior research suggests that firms in bilateral relationships have incentives to use accounting information to enhance stakeholders’ assessment of the firms’ reputation for fulfilling implicit claims. Using a database of firms’ major customers, we provide evidence that principal customers influence discretionary management earnings forecast disclosures. We find that firms with greater dependence on major customers are more likely to issue earnings forecasts, especially in environments where implicit claims with customers and resulting relationship-specific investments are significant. Further, we find that dependence on major customers is associated with more timely and frequent forecasts, but only when relationship-specific investments are more important. However, when relationship-specific investments are less important, the dependence on major customers is associated with more optimistically-biased forecasts. Overall, our results suggest that the decisions managers make about earnings forecasts are affected by the dependence on major customers.

Keywords: major customers, management earnings forecasts, forecast bias

JEL Classification: M41, L15

Suggested Citation

Cao, Jian and Hsieh, Hsin-Yi (Shirley) and Kohlbeck, Mark J., Do Major Customers Influence Voluntary Corporate Disclosure? (August 30, 2013). Available at SSRN: https://ssrn.com/abstract=2318651 or http://dx.doi.org/10.2139/ssrn.2318651

Jian Cao

Florida Atlantic University ( email )

777 Glades Rd.
Boca Raton, FL 33431
United States
561-297-3727 (Phone)

Hsin-Yi (Shirley) Hsieh

Florida Atlantic University ( email )

Boca Raton, FL 33431
United States
561-297-1463 (Phone)

Mark J. Kohlbeck (Contact Author)

Florida Atlantic University - School of Accounting ( email )

777 Glades Avenue
KH 119
Boca Raton, FL 33431-0991
United States
561-297-1363 (Phone)

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