Mandatory and Voluntary Disclosures: Dynamic Interactions

Posted: 6 Oct 2018

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2018

Abstract

Firms sometimes obtain soft private information about growth prospects along with hard information about current or past performance. In this environment, we find that optimizing disclosures over multiple periods yields nonlinear stock price reactions following both voluntary and mandatory disclosures. Further, we derive several predictions about distinct short‐run and long‐run effects of disclosures and nondisclosures on security prices. Under specified conditions, when the volatility of the firm's earnings increases, the average contemporaneous and prospective post‐mandatory‐disclosure market premia (for voluntary disclosures over nondisclosures) rise, while farther‐in‐future market discounts (for such voluntary disclosures) also become larger. Our analysis moreover predicts that both the disclosure probability and the information content of nondisclosures can increase in the persistence of earnings.

Keywords: mandatory disclosure; voluntary disclosure; dynamic; multipleperiods; growth; signaling; hard and soft information

JEL Classification: D21; D82; D83; G14; M41

Suggested Citation

Cianciaruso, Davide and Sridharan, Swaminathan, Mandatory and Voluntary Disclosures: Dynamic Interactions (September 1, 2018). Journal of Accounting Research, Vol. 56, No. 4, 2018, Available at SSRN: https://ssrn.com/abstract=3249102

Davide Cianciaruso (Contact Author)

HEC Paris - Accounting and Management Control Department ( email )

Jouy-en-Josas
France

Swaminathan Sridharan

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8807 (Phone)
847-467-1202 (Fax)

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