The Usefulness and Endogenous Supply of Disclosure Accessibility

49 Pages Posted: 20 Dec 2018 Last revised: 28 Sep 2020

See all articles by Qi Chen

Qi Chen

Duke University - Fuqua School of Business

Carlos Corona

Ohio State University (OSU) - Department of Accounting & Management Information Systems

Yun Zhang

George Washington University

Date Written: September 27, 2020

Abstract

In this paper, we analytically examine firms’ joint decisions to affect the informativeness of their key performance indicators (KPIs) and the accessibility of their supplementary disclosures (e.g., MD&A) when it is costly for investors to analyze the latter. We show that while disclosure accessibility can help investors extract information in supplementary disclosure to assess the informativeness of reported KPIs, its usefulness can also endogenously limit its supply. We analyze how the equilibrium level of disclosure accessibility is affected by the degree of information asymmetry between a firm and its investors, the accuracy of mandatory disclosure, and the degree of disclosure complexity. Our analyses provide a framework to evaluate policies and proposals aimed at improving investors’ understanding of firm disclosure.

Keywords: disclosure, attention, communication, complexity, accuracy, effective, investor, manager, complements

JEL Classification: D21, D83, M4

Suggested Citation

Chen, Qi and Corona, Carlos and Zhang, Yun, The Usefulness and Endogenous Supply of Disclosure Accessibility (September 27, 2020). Available at SSRN: https://ssrn.com/abstract=3294745 or http://dx.doi.org/10.2139/ssrn.3294745

Qi Chen

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
(919) 660-7753 (Phone)

Carlos Corona (Contact Author)

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States

HOME PAGE: http://https://fisher.osu.edu/people/corona.55

Yun Zhang

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

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