Voluntary Disclosure in a Multi-Audience Setting: An Empirical Investigation

Posted: 25 Aug 2004

See all articles by Sanjeev Bhojraj

Sanjeev Bhojraj

Cornell University - Samuel Curtis Johnson Graduate School of Management

Walter G. Blacconiere

Indiana University - Kelley School of Business - Department of Accounting

Julia D'Souza

Cornell University - Department of Accounting

Abstract

Theory suggests that voluntary disclosure decisions are a function of conflicting incentives vis-a-vis multiple audiences. However, few opportunities exist to investigate this issue empirically. We identify a setting that offers us such an opportunity: the electric utility industry as it transitions toward deregulation. We consider two types of voluntary disclosures: strategies to protect the firm's existing customer base and plans to exploit emerging opportunities under deregulation. We examine these particular disclosures since they are voluntary, relevant to all sample firms, and convey positive information about the firm's prospects in a deregulated environment. We consider three target audiences: industry regulators, capital market participants, and product market competitors. We find that our disclosure index is negatively associated with the magnitude of utilities' stranded costs in jurisdictions where the stranded cost recovery issue is unresolved, consistent with our predicted regulatory incentives. Further, our evidence indicates that capital market-related incentives are positively associated with our disclosure index. Finally, we find that product market-related incentives play a deterrent role in disclosure, but only after regulatory concerns have been resolved.

Keywords: Voluntary disclosure, disclosure incentives, electric utilities, deregulation

JEL Classification: M41, M45, L94

Suggested Citation

Bhojraj, Sanjeev and Blacconiere, Walter G. and D'Souza, Julia M., Voluntary Disclosure in a Multi-Audience Setting: An Empirical Investigation. Available at SSRN: https://ssrn.com/abstract=582341

Sanjeev Bhojraj (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Department of Accounting
Ithaca, NY 14853
United States
607-255-4069 (Phone)
607-254-4590 (Fax)

Walter G. Blacconiere

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States
812-855-2653 (Phone)
812-855-4985 (Fax)

Julia M. D'Souza

Cornell University - Department of Accounting ( email )

Ithaca, NY 14853
United States
607-255-2349 (Phone)
607-254-4590 (Fax)

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