Does Voluntary Non-Earnings Disclosure Substitute for Redacted Proprietary Contract Information?

56 Pages Posted: 16 Jul 2020 Last revised: 3 May 2023

See all articles by Mary E. Barth

Mary E. Barth

Stanford University - Graduate School of Business

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Xiaoli (Shaolee) Tian

Georgetown University - McDonough School of Business

Miaomiao Yu

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration

Date Written: January 9, 2023

Abstract

This study finds that voluntary non-earnings disclosure substitutes for redacted proprietary contract information. When firms redact contract information, they provide more voluntary disclosures and have higher information uncertainty and asymmetry. Although firms provide both voluntary non-earnings and earnings disclosures when they redact contract information, only non-earnings disclosures included in Forms 8-K mitigate the higher information uncertainty and asymmetry associated with redaction. These findings suggest earnings disclosures may not be specific enough to substitute for redacted contract information and contrast with the presumption in related research that firms provide earnings disclosures to substitute for withheld proprietary information. Our inferences particularly apply to research and development and license contracts, which are more likely to contain proprietary information that also is relevant to investors. Taken together, our study’s evidence can inform the SEC in its consideration of the effects of reducing mandatory disclosure on information available to investors.

Keywords: Contract redaction; information uncertainty; information asymmetry; voluntary non-earnings disclosure

JEL Classification: D8; M41; M48

Suggested Citation

Barth, Mary E. and Landsman, Wayne R. and Tian, Xiaoli (Shaolee) and Yu, Miaomiao, Does Voluntary Non-Earnings Disclosure Substitute for Redacted Proprietary Contract Information? (January 9, 2023). Available at SSRN: https://ssrn.com/abstract=3634659 or http://dx.doi.org/10.2139/ssrn.3634659

Mary E. Barth

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-9040 (Phone)
650-725-0468 (Fax)

Wayne R. Landsman (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Xiaoli (Shaolee) Tian

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

Miaomiao Yu

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration ( email )

LA 70803-6308
United States

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