Does Voluntary Disclosure Substitute for Mandatory Disclosure? Evidence from Contract Redactions

43 Pages Posted: 16 Jul 2020

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 - Department of Accounting and Business Law

Miaomiao Yu

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

Date Written: April 2020

Abstract

This study addresses whether firms provide more voluntary disclosures if they redact otherwise mandatorily disclosed contract information, whether firms have higher information uncertainty after they redact, and, if so, the extent to which this higher uncertainty is mitigated by the disclosures. Redactions are significantly positively associated with more earnings, non-earnings, and total voluntary disclosures made within 90 days after the redaction, but not before. The significant association mostly is attributable to research and development and license contracts, which suggests unredacted contracts of this type have more proprietary information. Redactions are significantly positively associated with information uncertainty for up to 180 days after the redactions. Although the disclosures mitigate the higher uncertainty, they do not offset it fully. This evidence can be informative to the SEC in its consideration of the effects of reducing mandatory disclosure on information available to investors.

Keywords: contract redaction; information uncertainty; voluntary disclosure; mandatory disclosure

JEL Classification: D8; M41; M48

Suggested Citation

Barth, Mary E. and Landsman, Wayne R. and Tian, Xiaoli (Shaolee) and Yu, Miaomiao, Does Voluntary Disclosure Substitute for Mandatory Disclosure? Evidence from Contract Redactions (April 2020). 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 - Department of Accounting and Business Law ( email )

McDonough School of Business
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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