Management Science, forthcoming
41 Pages Posted: 23 May 2018 Last revised: 14 Feb 2022
Date Written: January 22, 2022
This study develops and tests a simple model of voluntary disclosure where managers can choose to withhold (i.e., redact) certain elements from mandatory disclosure. We consider a setting where mandatory disclosure is a disaggregated disclosure (e.g., a financial statement), voluntary disclosure is an aggregate disclosure (e.g., an earnings forecast), and the costs of each type of disclosure are distinct. In this setting, we show that managers endogenously substitute between the two types of disclosure—managers that chose to withhold information from mandatory disclosure are more likely to provide voluntary disclosure. We test our predictions using a comprehensive sample of mandatory disclosures where the SEC allows the firm to redact information that would otherwise jeopardize its competitive position. Consistent with our predictions, we find strong evidence that redacted mandatory disclosure is associated with greater voluntary disclosure.
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