The Relationship between Voluntary Disclosure, External Financing, and Financial Status
Forthcoming in Journal of Business Finance & Accounting
Posted: 23 Apr 2015
Date Written: April 23, 2015
Using unique Swedish disclosure data from 2007 to 2012, this paper reports three important sets of findings with regard to the relationship between firms’ voluntary disclosure, external financing, and financial status. First, financially strong firms disclose more than weaker ones. Second, firms that obtain new financing (equity or debt) disclose more than firms that do not. Third, the association between voluntary disclosure and financing events is stronger in financially weak firms. This last finding is new in the literature. Perhaps financially weak firms that obtain external funding have higher disclosure to counteract contracting and valuation problems in the financial markets.
Keywords: Voluntary disclosure, financial status, external financing, equity issuance, debt overhang
JEL Classification: G30, G32
Suggested Citation: Suggested Citation