The Economics of Firms' Public Disclosure: Theory and Evidence

65 Pages Posted: 18 Sep 2017 Last revised: 17 Jul 2019

See all articles by Matthias Breuer

Matthias Breuer

Columbia University

Katharina Hombach

Frankfurt School of Finance & Management gemeinnützige GmbH - Accounting Department

Maximilian A. Müller

WHU - Otto Beisheim School of Management

Date Written: July 2019

Abstract

We develop and test an economic framework specific to firms’ public disclosure decisions. Building on the theory of complements and public goods, our analytical analysis suggests that the number of firms’ transacting stakeholders is a major determinant of disclosure demand and, hence, firms’ public disclosure decision. Using comprehensive data on stakeholders’ revealed preferences for firms’ public disclosure, our empirical analysis supports the predicted importance of the number of transacting stakeholders for firms’ public disclosure across several settings and disclosure margins (e.g., extensive and intensive margin, disclosure quantity and quality). Our framework is particularly suited for guiding the growing literature investigating non-standard public disclosure settings such as private firms and the influence of stakeholders other than shareholders.

Keywords: financial statements, public disclosure, disclosure demand, private firms, stakeholders

JEL Classification: M41

Suggested Citation

Breuer, Matthias and Hombach, Katharina and Müller, Maximilian A., The Economics of Firms' Public Disclosure: Theory and Evidence (July 2019). Available at SSRN: https://ssrn.com/abstract=3037002 or http://dx.doi.org/10.2139/ssrn.3037002

Matthias Breuer (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Katharina Hombach

Frankfurt School of Finance & Management gemeinnützige GmbH - Accounting Department

Adickesallee 32
Frankfurt, 60322
Germany

Maximilian A. Müller

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

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