Disclosure Substitution

Management Science, forthcoming

41 Pages Posted: 23 May 2018 Last revised: 14 Feb 2022

See all articles by Mirko Stanislav Heinle

Mirko Stanislav Heinle

University of Pennsylvania - Accounting Department

Delphine Samuels

University of Chicago -- Booth School of Business

Daniel J. Taylor

The Wharton School, University of Pennsylvania

Date Written: January 22, 2022

Abstract

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.

Suggested Citation

Heinle, Mirko Stanislav and Samuels, Delphine and Taylor, Daniel, Disclosure Substitution (January 22, 2022). Management Science, forthcoming, Available at SSRN: https://ssrn.com/abstract=3173664 or http://dx.doi.org/10.2139/ssrn.3173664

Mirko Stanislav Heinle (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Delphine Samuels

University of Chicago -- Booth School of Business ( email )

1101 East 58th Street
Chicago, IL 60637-1561
United States

Daniel Taylor

The Wharton School, University of Pennsylvania ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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