Measuring Disaggregation Quality
63 Pages Posted: 19 Feb 2018 Last revised: 11 Jun 2021
Date Written: April 18, 2019
We build a modified measure of disaggregation quality (MDQ) based on the disaggregation quality (DQ) measure from Chen, Miao, and Shevlin (2015). Both are parsimonious measures of disclosure quality in the annual report that can be constructed as the percentage of non-missing financial statement items in Compustat. However, we take additional screening steps to minimize counting errors by resolving missing values through accommodating GAAP changes over time and using a more comprehensive set of accounting equations from Casey et al. (2016). Consequently, MDQ relates more consistently to information quality proxies than DQ does, in pooled regression, across subsamples, and for various sample periods.
Keywords: Financial reporting quality; disclosure quality; disaggregation; financial statement articulation; Compustat; annual report
JEL Classification: M41; D83
Suggested Citation: Suggested Citation