Financial Reporting Quality and Proprietary Costs
39 Pages Posted: 18 Sep 2004
Date Written: June 2002
This study investigates the association between proprietary costs and the quality of financial reporting. Interpreting a firm's financial reporting policy as a choice of precision ("quality") for the disclosed accounting earnings, I find evidence that the higher the proprietary costs, the lower the precision ("quality") of reported accounting earnings. This is consistent with analytical work in disclosure theory which suggests that, ceteris paribus, as the proprietary cost of disclosure increases, the quality of disclosure decreases.
Keywords: Financial reporting quality, earnings quality, proprietary costs, disclosure, competition
JEL Classification: M41, M45
Suggested Citation: Suggested Citation