Information Bias and Disclosure

40 Pages Posted: 31 May 2019

See all articles by Joyce Tian

Joyce Tian

University of Waterloo - School of Accounting and Finance

Florin Sabac

University of Alberta - Department of Accounting, Operations & Information Systems

Date Written: April 4, 2019

Abstract

We examine the impact of biases in managerial judgment and in accounting reports on the disclosure of unverifiable private managerial information for stewardship purposes. We show that any biased managerial judgment in interpreting private information, and negatively biased accounting (conservatism), reduce timely disclosure of private managerial information by firms. Only positively biased (less conservative) accounting increases such disclosure by firms. Contrary to conventional wisdom, negative accounting biases, instead of counteracting positive managerial bias, act to further reduce disclosure, and thus the supply of timely infor-mation to capital markets. Consequently, we find that freedom from bias, both in managerial judgment and in accounting, more likely results in firms making timely disclosures.

Keywords: managerial bias, accounting bias, disclosure,neutrality, communica-tion, unverifiable managerial information, confirmatory role

Suggested Citation

Tian, Joyce and Sabac, Florin, Information Bias and Disclosure (April 4, 2019). University of Alberta School of Business Research Paper No. 2019-304, Available at SSRN: https://ssrn.com/abstract=3385134 or http://dx.doi.org/10.2139/ssrn.3385134

Joyce Tian (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada

Florin Sabac

University of Alberta - Department of Accounting, Operations & Information Systems ( email )

Edmonton, Alberta T6G 2R6
Canada

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