Unbalanced Information and the Interaction between Information Acquisition, Operating Activities and Voluntary Disclosure
Posted: 1 Jul 2007
As different activities cannot be measured or communicated with the same precision, accounting information is often only a partial and unbalanced reflection of the fundamental economics, emphasizing certain aspects of the underlying operations while disregarding others. We highlight this inherent imbalance in information as the source of an interaction between corporate operating and discretionary disclosure strategies, and thereby also as an important determinant of the information acquisition strategy. We demonstrate that information imbalance, via its distorting effect on operating activities, leads to a reduction in the propensity of managers to acquire information and provide voluntary disclosures.
Keywords: Financial accounting, Asymmetric information, Voluntary disclosure
JEL Classification: G14, M41, M45
Suggested Citation: Suggested Citation