Do Managers Really Guide Through the Fog? On the Challenges in Assessing the Causes of Voluntary Disclosure

17 Pages Posted: 17 Sep 2016

See all articles by Travis Dyer

Travis Dyer

Cornell University

Mark H. Lang

University of North Carolina at Chapel Hill

Lorien Stice-Lawrence

University of Southern California - Leventhal School of Accounting

Date Written: July 2016

Abstract

Guay, Samuels, and Taylor (2016) document that firms with longer and more complex 10-Ks provide relatively more voluntary disclosure, which they interpret as evidence that managers use voluntary disclosure to mitigate negative effects of complex mandatory disclosure. We review the results of Guay et al. and focus on two main challenges to inferring causality: (1) the coincidence of upward over-time trends in annual report length, complexity, and voluntary disclosure, and (2) the potential for omitted correlated variables, such as changes in firm economics, to drive changes in 10-K textual characteristics and voluntary disclosure. While the results in Guay et al. are extensive and robust, we argue that economic drivers of, and trends in, voluntary disclosure present important avenues for future research.

Keywords: Voluntary Disclosure, Financial Statement Complexity

JEL Classification: D82, D83, G14, M41, M4

Suggested Citation

Dyer, Travis and Lang, Mark H. and Stice-Lawrence, Lorien, Do Managers Really Guide Through the Fog? On the Challenges in Assessing the Causes of Voluntary Disclosure (July 2016). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2839274

Travis Dyer

Cornell University ( email )

Ithaca, NY 14850
United States

Mark H. Lang

University of North Carolina at Chapel Hill ( email )

Kenan-Flagler Business School
McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-1644 (Phone)
919-962-4727 (Fax)

Lorien Stice-Lawrence (Contact Author)

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States

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