Blame Attribution and Disclosure Propensity
The Accounting Review, forthcoming
60 Pages Posted: 25 Jul 2018 Last revised: 19 Oct 2020
Date Written: August 15, 2020
We hypothesize that firms are less likely to disclose information regarding a material negative economic event for which the firm is likely to be blamed than for a negative economic event for which the firm is likely to be perceived as blameless. We identify 383 material negative economic events (casualty accidents, oil spills, catastrophes, investor class action lawsuits) and find thatfirms are approximately four times less likely to disclose information following a negative blamed event than for a negative blameless event. Consistent with the assertion underlying our hypothesisthat disclosure of a blamed event increases the firm’s reputation and litigation risks, we find that firms that disclose after a blamed event, but not a blameless event, experience greater reputation and litigation costs than firms that do not disclose. We also find that blame attribution provides incremental information over manager career concerns in the disclosure decision. These findings suggest that an event-specific factor—blame attribution—affects firms’ propensity to provide disclosures about material negative economic events.
Keywords: economic event, voluntary disclosure, blame, litigation risk, firm reputation
JEL Classification: K22, M41
Suggested Citation: Suggested Citation