Financial Disclosure Transparency and Employee Wages

55 Pages Posted: 23 Jan 2018 Last revised: 16 Jul 2020

See all articles by John (Jianqiu) Bai

John (Jianqiu) Bai

Northeastern University - D'Amore-McKim School of Business

Matthew Serfling

University of Tennessee

Sarah Shaikh

University of Washington - Department of Accounting

Date Written: July 15, 2020

Abstract

We test the hypothesis that less transparency in financial disclosures is an undesirable firm attribute that increases the amount of information and unemployment risk that employees bear, resulting in a wage premium. Using establishment-level wage data from the U.S. Census Bureau, we document that firms with less transparent disclosures pay their employees more, especially when employees bear greater information acquisition costs, have more influence in the wage-setting process, and own more stock in their firm. Our results also hold to utilizing instrumental variables and two quasi-natural experiments arising from the passage of the Sarbanes-Oxley Act as shocks to the transparency of a firm’s financial reporting environment. Overall, our results suggest that accounting disclosure choices can generate externalities on an important group of stakeholders.

Keywords: Transparency, Disclosures, Employee Wages, Management Forecasts, Readability

JEL Classification: M40, M41, J31

Suggested Citation

Bai, John (Jianqiu) and Serfling, Matthew and Shaikh, Sarah, Financial Disclosure Transparency and Employee Wages (July 15, 2020). Available at SSRN: https://ssrn.com/abstract=3103237 or http://dx.doi.org/10.2139/ssrn.3103237

John (Jianqiu) Bai

Northeastern University - D'Amore-McKim School of Business ( email )

220 B RP
Boston, MA 02115
United States

Matthew Serfling (Contact Author)

University of Tennessee ( email )

Haslam College of Business
Knoxville, TN 37996
United States
865-974-1952 (Phone)

Sarah Shaikh

University of Washington - Department of Accounting ( email )

Seattle, WA WA
United States

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