JOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2000
Christine A. Botosan
The effect of corporate disclosure on the cost of equity capital is a matter of considerable interest and importance to both corporations and the investment community. However, the relationship between disclosure level and cost of capital is not well established and has proved difficult for researchers to quantify. As described in this article, the author's 1997 study (published in The Accounting Review) was the first to measure and detect a direct relationship between disclosure and cost of capital. After examining the annual reports of 122 manufacturing companies, the author concluded that companies providing more extensive disclosure had a lower (forward-looking) cost of equity capital (measured using Value Line forecasts with an EBO valuation formula that derives from the dividend discount model). For companies with extensive analyst coverage, differences in disclosure do not appear to affect cost of capital. But for companies with small analyst followings, differences in disclosure do appear to matter. Among this group of companies, the firms judged to have the highest level of disclosure had a cost of equity capital that was nine-percentage points lower than otherwise similar firms with a minimal level of disclosure. Closer analysis of some of the specific disclosure practices also suggests that, for small firms with limited analyst coverage, there are benefits to providing more forward-looking information, such as forecasts of sales, profits, and capital expenditures, and enhanced disclosure of key non-financial statistics, such as order backlogs, market share, and growth in units sold. In closing, the article also discusses an interesting new study (by Lang and Lundholm) that suggests there is an important distinction between effective corporate disclosure and "hyping the stock." The findings of this study show that while higher levels of disclosures are associated with higher stock prices, sudden increases in the frequency of disclosure are viewed with skepticism. [source]

OPEN KNOWLEDGE DISCLOSURE: AN OVERVIEW OF THE EVIDENCE AND ECONOMIC MOTIVATIONS

JOURNAL OF ECONOMIC SURVEYS, Issue 2 2007
Julien Pénin
Abstract This paper reviews current literature on open knowledge disclosure strategies used by firms. It is usually acknowledged that for an innovative firm that does not benefit from a natural protection (such as lead time advance) the best strategy is to keep an innovation secret as long as possible or to protect it through an exclusive patent. However, in apparent contrast to this traditional view, many studies suggest that firms often disclose important parts of their knowledge through scientific publications, conferences, the Internet, etc. This paper aims to provide an overview first of the evidence supporting the existence of open knowledge disclosure and second of the economic motivations that encourage rational, profit seeking firms to adopt these behaviours. [source]

The Association between Auditor Choice, Ownership Retained, and Earnings Disclosure by Firms Making Initial Public Offerings,

CONTEMPORARY ACCOUNTING RESEARCH, Issue 1 2002
Paul A. Copley
Abstract Using a system of three simultaneous equations, we test the predictions of Datar, Feltham, and Hughes 1991 and Hughes 1986 between auditor choice, earnings disclosures, and retained ownership in U.S. firms making initial public offerings of securities. Using a sample of initial public offerings between 1990 and 1997, we find that the demand for high-quality auditors increases with firm risk. Additionally, we find that auditor choice, earnings disclosure, and risk are determinants of retained ownership, which is consistent with the predictions of Datar et al. and Hughes that auditor choice and direct disclosure are substitute signals for ownership retention. Further, our results suggest that the signals chosen (i.e., retained ownership, auditor choice, and disclosure) are related through their cost structures and are chosen jointly to minimize the overall cost to the entrepreneur. [source]

The Association Between Web-Based Corporate Performance Disclosure and Financial Analyst Behaviour Under Different Governance Regimes

CORPORATE GOVERNANCE, Issue 6 2007
Walter Aerts
In this study, we assert and test that the determination of corporate performance communication and financial analysts' earnings forecasting work are closely intertwined processes. The resulting endogeneity in capital markets' information dissemination and use is strongly influenced by a country's governance regime. Results from simultaneous equation regressions show significant interrelationships between financial analysts' activities and corporate disclosure transparency for North American firms. Moreover, analyst following underlies corporate disclosure, which ultimately leads to a reduction in the dispersion of analysts' earnings forecasts. In contrast, capital markets' information dynamics for continental European firms are much weaker. [source]

Corporate Governance and Equity Liquidity: analysis of S&P transparency and disclosure rankings

CORPORATE GOVERNANCE, Issue 4 2007
Wei-Peng Chen
This paper sets out to investigate the effects of disclosure, and other corporate governance mechanisms, on equity liquidity, arguing that those companies adopting poor information transparency and disclosure practices will experience serious information asymmetry. Since poor corporate governance leads to greater information asymmetry, liquidity providers will incur relatively higher adverse information risks and will therefore offer higher information asymmetry components in their effective bid-ask spreads. The Transparency and Disclosure (T&D) rankings of the individual stocks on the S&P 500 index are employed to examine whether firms with greater T&D rankings have lower information asymmetry components and lower stock spreads. Our results reveal that the economic costs of equity liquidity, i.e. the effective spread and the quoted half-spread, are greater for those companies with poor information transparency and disclosure practices. [source]

Trends in Levels of Voting and Voting Disclosure

CORPORATE GOVERNANCE, Issue 2 2006
Chris Mallin
No abstract is available for this article. [source]

Audit Committee Independence and Disclosure: choice for financially distressed firms

CORPORATE GOVERNANCE, Issue 4 2003
Joseph V. Carcello
This study examines the relation between audit committee independence and disclosure choice for financially distressed US firms. The tenor of both the financial statement notes and Management Discussion and Analysis (MD&A) is considered. For firms experiencing financial distress, there is a significant positive relation between the percentage of affiliated directors on the audit committee and the optimism of the going-concern discussion in both the notes and the MD&A. These results add to the growing body of literature documenting a relation between audit committee independence and financial reporting quality. [source]

The Relationship between Corporate Governance, Transparency and Financial Disclosure

CORPORATE GOVERNANCE, Issue 4 2002
Christine Mallin
No abstract is available for this article. [source]

Medical Error Identification, Disclosure, and Reporting: Do Emergency Medicine Provider Groups Differ?

ACADEMIC EMERGENCY MEDICINE, Issue 4 2006
Cherri Hobgood MD
Abstract Objectives: To determine if the three types of emergency medicine providers,physicians, nurses, and out-of-hospital providers (emergency medical technicians [EMTs]),differ in their identification, disclosure, and reporting of medical error. Methods: A convenience sample of providers in an academic emergency department evaluated ten case vignettes that represented two error types (medication and cognitive) and three severity levels. For each vignette, providers were asked the following: 1) Is this an error? 2) Would you tell the patient? 3) Would you report this to a hospital committee? To assess differences in identification, disclosure, and reporting by provider type, error type, and error severity, the authors constructed three-way tables with the nonparametric Somers' D clustered on participant. To assess the contribution of disclosure instruction and environmental variables, fixed-effects regression stratified by provider type was used. Results: Of the 116 providers who were eligible, 103 (40 physicians, 26 nurses, and 35 EMTs) had complete data. Physicians were more likely to classify an event as an error (78%) than nurses (71%; p = 0.04) or EMTs (68%; p < 0.01). Nurses were less likely to disclose an error to the patient (59%) than physicians (71%; p = 0.04). Physicians were the least likely to report the error (54%) compared with nurses (68%; p = 0.02) or EMTs (78%; p < 0.01). For all provider and error types, identification, disclosure, and reporting increased with increasing severity. Conclusions: Improving patient safety hinges on the ability of health care providers to accurately identify, disclose, and report medical errors. Interventions must account for differences in error identification, disclosure, and reporting by provider type. [source]

Attributions and Emotional Reactions to the Identity Disclosure ("Coming Out") of a Homosexual Child,

FAMILY PROCESS, Issue 2 2001
Jorge C. Armesto Ed.M.
This study examined factors that contribute to parental rejection of gay and lesbian youth. College students (N = 356) were asked to imagine being the parent of an adolescent son who recently disclosed that he was gay. Consistent with study hypotheses and based on attribution and moral affect theory, results of regression analyses indicated that greater perceptions of control over homosexuality, higher proneness to experience shame, and lower proneness to experience guilt were associated with increasing negative reactions toward an imagined homosexual child. Also in line with study hypotheses, greater willingness to offer help to the hypothetical child was predicted by lower perceptions of control over homosexuality, less intensely unfavorable emotional reactions, less proneness to experience guilt, and greater reported likelihood of experiencing affection toward him. Theoretical and clinical implications of this research are discussed. [source]

Information, Selective Disclosure, and Analyst Behavior

FINANCIAL MANAGEMENT, Issue 1 2009
Anchada Charoenrook
This paper examines whether the prohibition of selective disclosures to equity research analysts mandated by Regulation FD alters the amount of information and the manner in which it is revealed to the market. We demonstrate that equity research analysts are more responsive to information contained in company-initiated disclosures after Reg FD, suggesting that regulation has affected the importance of various channels of communication. We also present evidence consistent with the notion that managers use earnings guidance as a substitute for selective disclosure following the passage of Reg FD. [source]

Lockup and Voluntary Earnings Forecast Disclosure in IPOs

FINANCIAL MANAGEMENT, Issue 3 2007
Beng Soon Chong Associate Professors
We examine the relation between lockup length and voluntary earnings forecast disclosures for IPOs in Singapore. Unlike firms in the United States, companies in Singapore are allowed to provide earnings forecasts in their IPO prospectuses. We find that forecasters are more likely to accept longer lockup periods, so that the lockup expires after the first post-IPO earnings announcement. Our study also shows that because the lockup agreement removes personal incentives to issue aggressive forecasts, IPO firms tend to issue conservative forecasts. Overall, our results suggest that the lockup mechanism adds credibility to the earnings forecast given in the IPO prospectus. [source]

Corporate communication of financial risk

ACCOUNTING & FINANCE, Issue 2 2010
Grantley Taylor
M49 Abstract This study provides insights on the Financial Risk Management Disclosure (FRMD) patterns of Australian listed resource companies for the 2002,2006 period leading up to and immediately following adoption of the International Financial Reporting Standards (IFRS). Regression analysis demonstrates that corporate governance and capital raisings of firms are significant and positively associated with FRMD patterns. In contrast, overseas stock exchange listing of firms is significantly negatively associated with FRMD patterns. The findings show that the introduction of IFRS changes corporation's willingness to communicate risk information. [source]

Quantifying the Effects of Mask Metadata Disclosure and Multiple Releases on the Confidentiality of Geographically Masked Health Data

GEOGRAPHICAL ANALYSIS, Issue 1 2008
Dale L. Zimmerman
The availability of individual-level health data presents opportunities for monitoring the distribution and spread of emergent, acute, and chronic conditions, as well as challenges with respect to maintaining the anonymity of persons with health conditions. Particularly when such data are mapped as point locations, concerns arise regarding the ease with which individual identities may be determined by linking geographic coordinates to digital street networks, then determining residential addresses and, finally, names of occupants at specific addresses. The utility of such data sets must therefore be balanced against the requirements of protecting the confidentiality of individuals whose identities might be revealed through the availability of precise and accurate locational data. Recent literature has pointed toward geographic masking as a means for striking an appropriate balance between data utility and confidentiality. However, questions remain as to whether certain characteristics of the mask (mask metadata) should be disclosed to data users and whether two or more distinct masked versions of the data can be released without breaching confidentiality. In this article, we address these questions by quantifying the extent to which the disclosure of mask metadata and the release of multiple masked versions may affect confidentiality, with a view toward providing guidance to custodians of health data sets. The masks considered include perturbation, areal aggregation, and their combination. Confidentiality is measured by the areas of confidence regions for individuals' locations, which are derived under the probability models governing the masks, conditioned on the disclosed mask metadata. [source]

Disclosure of reserve quantum in the extractive industries

ACCOUNTING & FINANCE, Issue 1-2 2001
Malik Mirza
We explore why some firms in the extractive industries disclose mineral reserve quantum in their annual reports and others do not. We propose that the firms' reserve disclosure policies are a function of the extent of information asymmetries, as well as information production, litigation and proprietary costs. More specifically, we propose that a firm's decisions to disclose reserves in the annual report are a function of the stage of the firm's operations, use of project financing, and the cost of measuring reserves. Empirical tests are confirmatory. [source]

Voluntary Disclosure of Good and Bad Earnings News in a Low Litigation Setting,

ACCOUNTING PERSPECTIVES, Issue 4 2008
Philip T. Sinnadurai
ABSTRACT This study uses a historical setting in which expected litigation costs were low (i.e., Australia, from 1993 to 1996) to investigate whether companies with good news were more likely to preempt annual earnings than their counterparts with bad news. Empirical tests compare the probability of preemption conditional on having good news with the probability of preemption conditional on having bad news. The models control for other potential determinants of disclosure policy that have been documented in the literature. The results do not support the research hypothesis that companies with good news were more likely to preempt annual earnings than companies with bad news. This finding suggests that there may be other factors driving disclosure of bad news, in addition to those acknowledged in the extant literature. The evidence also indicates that in Australia during the investigation period, the probability of preemption was positively associated with firm size and analyst following and differed as a function of industry membership. [source]

Conflicts and Finance: Disclosure still incomplete

INTERNATIONAL JOURNAL OF CLINICAL PRACTICE, Issue 7 2008
G. Jackson Editor
No abstract is available for this article. [source]

Securities Laws, Disclosure, and National Capital Markets in the Age of Financial Globalization

JOURNAL OF ACCOUNTING RESEARCH, Issue 2 2009
RENÉ M. STULZ
ABSTRACT As barriers to international investment fall and technology improves, the cost advantages for a firm's securities to trade publicly in the country in which that firm is located and for that country to have a market for publicly traded securities distinct from the capital markets of other countries will progressively disappear. Securities laws remain an important determinant of whether and where securities are issued, how they are valued, who owns them, and where they trade. I show that there is a demand from entrepreneurs for mechanisms that allow them to commit to credible disclosure because disclosure helps reduce agency costs. Under some circumstances, mandatory disclosure through securities laws can help satisfy that demand, but only provided investors or the state can act on the information disclosed and the laws cannot be weakened ex post too much through lobbying by corporate insiders. With financial globalization, national disclosure laws can have wide-ranging effects on a country's welfare, on firms and on investor portfolios, including the extent to which share holdings reveal a home bias. In equilibrium, if firms can choose the securities laws they are subject to when they go public, some firms will choose stronger securities laws than those of the country in which they are located and some firms will do the opposite. [source]

Keynesian Beauty Contest, Accounting Disclosure, and Market Efficiency

JOURNAL OF ACCOUNTING RESEARCH, Issue 4 2008
PINGYANG GAO
ABSTRACT This paper examines the market efficiency consequences of accounting disclosure in the context of stock markets as a Keynesian beauty contest, an influential metaphor originally proposed by Keynes [1936] and recently formalized by Allen, Morris, and Shin [2006]. In such markets, public information plays an additional commonality role, biasing stock prices away from the consensus fundamental value toward public information. Despite this bias, I demonstrate that provisions of public information always drive stock prices closer to the fundamental value. Hence, as a main source of public information, accounting disclosure enhances market efficiency, and transparency should not be compromised on grounds of the Keynesian-beauty-contest effect. [source]

Do Family Firms Provide More or Less Voluntary Disclosure?

JOURNAL OF ACCOUNTING RESEARCH, Issue 3 2008
SHUPING CHEN
ABSTRACT We examine the voluntary disclosure practices of family firms. We find that, compared to nonfamily firms, family firms provide fewer earnings forecasts and conference calls, but more earnings warnings. Whereas the former is consistent with family owners having a longer investment horizon, better monitoring of management, and lower information asymmetry between owners and managers, the higher likelihood of earnings warnings is consistent with family owners having greater litigation and reputation cost concerns. We also document that family ownership dominates nonfamily insider ownership and concentrated institutional ownership in explaining the likelihood of voluntary disclosure. Using alternative proxies for the founding family's presence in the firm leads to similar results. [source]

Voluntary Disclosure, Earnings Quality, and Cost of Capital

JOURNAL OF ACCOUNTING RESEARCH, Issue 1 2008
JENNIFER FRANCIS
ABSTRACT We investigate the relations among voluntary disclosure, earnings quality, and cost of capital. We find that firms with good earnings quality have more expansive voluntary disclosures (as proxied by a self-constructed index of coded items found in 677 firms' annual reports and 10-K filings in fiscal 2001) than firms with poor earnings quality. In unconditional tests, we find that more voluntary disclosure is associated with a lower cost of capital. However, consistent with the complementary association between disclosure and earnings quality, we find that the disclosure effect on cost of capital is substantially reduced or disappears completely (depending on the cost of capital proxy) once we condition on earnings quality. Extensions probing alternative proxies show that our findings are robust to measures of earnings quality and cost of capital, but not to other measures of voluntary disclosure. In particular, we find opposite relations for voluntary disclosure measures based on management forecasts and conference calls, and we find no relations for a press release based measure. [source]

The Credibility of Voluntary Disclosure and Insider Stock Transactions

JOURNAL OF ACCOUNTING RESEARCH, Issue 4 2007
FENG GU
ABSTRACT We examine stock price reaction to voluntary disclosure of innovation strategy by high-tech firms and its relation with insider stock transactions before the disclosure. We find that, despite the qualitative and subjective nature of strategy-related disclosure, there is positive stock price reaction to the disclosure. The evidence suggests that investors view the disclosure as credible good news. We also find that the disclosure is associated with more positive stock price reaction when it is preceded by insider purchase transactions. This evidence is consistent with insider purchase enhancing the credibility of the disclosure. The credibility-enhancing effect is found to be stronger for firms with higher degrees of information asymmetry (younger firms, firms with lower analyst following, loss firms, and firms with higher research and development (R&D) intensity). Our evidence also indicates that predisclosure insider purchase is associated with greater future abnormal returns, suggesting that managers are privy to good news shortly before the disclosure. [source]

Recognition v. Disclosure, Auditor Tolerance for Misstatement, and the Reliability of Stock-Compensation and Lease Information

JOURNAL OF ACCOUNTING RESEARCH, Issue 3 2006
ROBERT LIBBY
ABSTRACT We examine whether information in footnotes might lack reliability because auditors permit more misstatement in disclosed, as opposed to recognized, amounts. In both the stock-compensation and lease settings, audit partners require greater correction of misstatements in recognized amounts than in the equivalent disclosed amounts. Debriefing questions indicate that the partners make these decisions knowingly, even though they expect greater client resistance to correcting recognized amounts, because they view recognized amounts as more material. Partners also spend more time on correction decisions for recognized information. While prior literature suggests that amounts are often relegated to footnotes because they are less reliable, our results suggest that the actual choice to disclose versus recognize can also reduce information reliability. These results have implications for the interpretation of prior research on the reliability of recognized and disclosed numbers, for financial-accounting standard setters who may want to consider the reliability effects of their recognition versus disclosure decisions, and for auditing standard setters who may wish to clarify auditors' responsibilities for preventing misstatements in disclosed amounts. [source]

Enforced Standards Versus Evolution by General Acceptance: A Comparative Study of E-Commerce Privacy Disclosure and Practice in the United States and the United Kingdom

JOURNAL OF ACCOUNTING RESEARCH, Issue 1 2005
KARIM JAMAL
ABSTRACT We present data on privacy practices in e-commerce under the European Union's formal regulatory regime prevailing in the United Kingdom and compare it with the data from a previous study of U.S. practices that evolved in the absence of government laws or enforcement. The codification by the E.U. law, and the enforcement by the U.K. government, improves neither the disclosure nor the practice of e-commerce privacy relative to the United States. Regulation in the United Kingdom also appears to stifle development of a market for Web assurance services. Both U.S. and U.K. consumers continue to be vulnerable to a small number of e-commerce Web sites that spam their customers, ignoring the latter's expressed or implied preferences. These results raise important questions about finding a balance between enforced standards and conventions in financial reporting. In the second half of the 20th century, financial reporting has been characterized by both a preference for legislated standards and a lack of faith in its evolution as a body of social conventions. Evidence on whether this faith in standards over conventions is justified remains to be marshaled. [source]

Life Sciences Roundtable: Strategy and Financing

JOURNAL OF APPLIED CORPORATE FINANCE, Issue 2 2009
Judy Lewent
In light of the challenges facing the pharmaceutical industry, a distinguished group of pharma executives and strategic and financial advisers discusses the following corporate decisions: Strategy: What business model is most likely to maximize long-term shareholder value? For example, is diversification by big pharma into areas like consumer healthcare and generics a reliable way to create sustainable value? Capital allocation: What are the best methods for evaluating investments in pharma R&D, and for deciding which programs should be terminated and which assets divested? If conventional DCF isn't much help in a world where R&D outcomes are so uncertain, what about proposed models like real options? Corporate governance and incentive systems: Should big pharma continue to outsource ever more of its R&D functions to biotech and venture capital? Or can it overcome the problems associated with size by creating more decentralized business units and trying to replicate the accountability and incentives of smaller biotech firms? Capital structure and payout policy: Are the large cash and equity positions and minimal payouts of big pharma, typically justified as cushioning the uncertainties associated with pharma R&D, likely to be the value-maximizing capital structure in the future? With many biotechs struggling and venture capital scarce, where are the new sources of capital for the industry? And can future deals be structured in ways that help bring about higher returns for big pharma as well as the R&D providers? Disclosure: What should management tell investors to help ensure that their companies' policies and promising investments are reflected in their stock prices? [source]

Modelling Transparency in Disclosure: The Case of Foreign Exchange Risk Management

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 5-6 2007
Andrew Marshall
Abstract:, When managers choose not to disclose all the relevant information in their possession in their financial statements, there is an information gap between the managers and users and consequently a lack of transparency. We model the degree of transparency observed when disclosures of foreign exchange (FX) risk management in financial statements are compared to managerial information on FX risk management policy, as evidenced in questionnaire responses. In this comparative study of US and UK firms we find incomplete disclosure in both samples but with differing aspects. In the US case, the information gap is lower where the information has higher relevance or firms with higher financial risk (greater leverage) are signalling the extent of risk, but the gap is greater where firms are in competitive product markets. For the UK sample, the information gap is significantly lower where firms have higher financial risk or higher liquidity but the gap is greater where the shares are more closely held. We conclude that modelling and explaining this aspect of incomplete accounting disclosure in an international setting must be sufficiently flexible to accommodate national differences in managerial behaviour. [source]

Social and Environmental Disclosure and Corporate Characteristics: A Research Note and Extension

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 3-4 2001
Rob Gray
This paper is concerned with the attempts to explain the disclosure of social and environmental information in the annual reports of large companies by reference to observable characteristics of those companies. An extensive literature has sought to establish whether variables such as corporate size, profit and industry segments can explain corporations' disclosure practices. The results from that predominantly North American and Australasian literature are largely inconclusive. This paper provides an extension of that literature by considering a more disaggregated specification of social and environmental disclosure and by employing a detailed time-series data set. By so doing, the paper tests two possible explanations for the inconclusiveness of prior research: namely that any relationships between corporate characteristics and disclosure are dependent upon the type of disclosure and that any such relationships are not stable through time. The results provide support for these explanations as sufficient, if not necessary, conditions for explaining the inconsistency in prior results. [source]

Recognition versus Disclosure: An Investigation of the Impact on Equity Risk Using UK Operating Lease Disclosures

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 9-10 2000
Vivien Beattie
This study examines the equivalency of accounting recognition versus disclosure. OLS regression analysis is used to determine whether there is an association between equity risk and an adjustment to financial risk for off-balance sheet operating leases. Two methods of adjustment are considered: constructive capitalisation and a simple factor method. The observation of a reliably positive association suggests that UK investors/analysts view operating leases from a property rights perspective rather than an ownership perspective. This supports the argument for recognition of all lease rights and obligations ,on-balance sheet', as proposed in the recent G4+1 discussion paper ASB (1999). [source]

Disclosure to therapists: What is and is not discussed in psychotherapy

JOURNAL OF CLINICAL PSYCHOLOGY, Issue 4 2002
Barry A. Farber
This study used the 80-item Disclosure to Therapist Inventory,R to investigate the nature of patient disclosure within therapy. Participants (45 men, 102 women) were all currently in therapy. A Principal Components Analyses with varimax rotation yielded nine meaningful factors; mean disclosure scores were lowest for the factors of Sexuality and Procreation and highest for the factors of Negative Affect and Intimacy. Specific items most extensively discussed included characteristics of parents that are disliked, and aspects of one's personality that are disliked or worrisome. No significant differences were found in overall degree of disclosure as a function of patient gender or shame-proneness; disclosure was, however, found to be positively correlated with strength of the therapeutic alliance. © 2002 Wiley Periodicals, Inc. J Clin Psychol 58: 359,370, 2002. [source]