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I investigate whether algorithmic trading (AT) affects the provision of management guidance. Existing research finds that AT decreases fundamental information acquisition before earnings announcements and consequently reduces the informativeness of prices. To compensate for reduced information acquisition, I predict and find that managers at firms with more AT activity increase the quantity and quality of guidance issued at earnings announcements. Evidence is consistent with managers responding to reduced information acquisition, as opposed to changes in liquidity, and results suggest guidance in response to AT is effective at reducing information asymmetry. These findings identify a new channel through which AT affects stock price informativeness by documenting a link to managers' disclosure decisions. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G14; G19; G10. [ABSTRACT FROM AUTHOR]

We provide the first evidence after Regulation G on firms' non-GAAP EPS denominator choices and whether they are informative or opportunistic. From 2013 to 2019, 17 percent of annual non-GAAP EPS numbers use denominators different from that of GAAP diluted EPS, which makes denominator adjustments among the most prevalent individual types of non-GAAP adjustments. For firms reporting GAAP and non-GAAP profits or GAAP losses and non-GAAP profits, we provide evidence consistent with denominator adjustments increasing non-GAAP EPS informativeness. Our evidence also suggests that opportunism in denominator choices is concentrated in firms reporting GAAP losses and non-GAAP profits and failing to adjust the denominator. Such nonadjustment is inconsistent with SEC requirements to report non-GAAP EPS "on a diluted basis" because the EPS denominator for a GAAP loss excludes dilutive claims. Although the SEC largely overlooks such firms, they are more likely, on average, to report non-GAAP EPS that analysts consider inflated. JEL Classifications: M40; M41; M48. [ABSTRACT FROM AUTHOR]

Policies that require, or recommend, disclosure of corporate tax information are becoming more common throughout the world, as are examples of tax-related information increasingly influencing public policy and perceptions. In addition, companies are increasing the voluntary provision of tax-related information. We describe those trends and place them within a taxonomy of public and private tax disclosure. We then review the academic literature on corporate tax disclosures and discuss what is known about their effects. One key takeaway is the paucity of evidence that many tax disclosures mandated with the aim of increasing tax revenue have produced additional revenue. We highlight many crucial unanswered questions, answers to which would inform future tax legislation and financial accounting rule making. [ABSTRACT FROM AUTHOR]

This paper investigates whether the use of Big Data analytics by firms has a spillover effect on management forecasting behavior. Insights provided by Big Data could potentially improve firms' ability to forecast earnings (supply channel) and investor demand for earnings information is likely higher for firms engaging in data analytics (demand channel). Using a text-based measure of firms' commitments to and usage of Big Data analytics, we find that Big Data analytics usage is positively associated with the propensity to issue management earnings forecasts. Consistent with the "supply channel" explanation, we find that Big Data analytics usage is positively associated with management forecast accuracy as well. Also, supporting the "demand channel" explanation, we find that Big Data analytics usage is associated with greater analyst following. Our findings of improved disclosure following commitments to Big Data analytics highlight a potentially unintended benefit of the Big Data revolution. [ABSTRACT FROM AUTHOR]

SUMMARY: Regulators, investors, and boards of directors are increasingly demanding information about organizations' cybersecurity risk management. I examine the effect of the AICPA's voluntary cybersecurity examination service on investor perceptions and decisions. Similar to a previous AICPA IT-related assurance service called WebTrust that failed in the marketplace, cybersecurity examinations face competition from less comprehensive and less costly assurance services in a nonstandardized assurance market, and it is unclear whether investors will recognize the value provided by the more comprehensive assurance service. I find that investors are more willing to invest when management disclosures describe a cybersecurity examination compared with a less comprehensive assurance service but only if the assurance is in response to a cybersecurity incident. I also find that this effect is mediated by investor perceptions of assurance quality. I, however, do not find support for these same effects when the assurance is disclosed in the absence of an incident. [ABSTRACT FROM AUTHOR]

SPACs are formed to combine with and provide a private firm public trading status and a capital infusion. Firms that enter the public market through a SPAC combination are believed to possess greater voluntary disclosure discretion than traditional IPOs as they obtain their public trading status through a merger. Consistent with regulators' concerns, recent research finds that SPACs use this discretion opportunistically by issuing optimistic guidance. This study examines how investors respond to these disclosures. We find that optimistic projections increase retail purchasing, which is higher than that of institutional purchasing. Additionally, we find that investors partially see through the optimism and exit at the redemption date. Furthermore, we find that institutional investors increasingly divest their holdings for combinations with optimistic projections. Investors as a whole, however, fail to see through the optimism, as combinations with optimistic projections considerably underperform in the two years following the combination. Data Availability: All data are publicly available from the sources identified in the text. JEL Classifications: M41. [ABSTRACT FROM AUTHOR]

As the U.S. Securities and Exchange Commission (SEC) implements rules to improve and standardize climate-related disclosures among public companies and the climate change dilemma unfolds, understanding the economic implications of climate risk disclosures becomes crucial for stakeholders. This study aims to synthesize research developments in the climate risk disclosure domain to provide valuable insights into current research trends and identify potential avenues for future research. More specifically, this study identifies prior research that investigates the economic or financial effects of climate disclosures. Prior studies find both positive and negative effects of climate risk and suggest that climate disclosures may mitigate the effects of climate risk. Our review synthesizes the results of prior studies and identifies the prevailing theoretical frameworks used. Based on our assessment of the findings in prior studies, we also reveal emerging research trends and suggestions for future research. Data Availability: The data used in this research are publicly available and can be made available upon request. JEL Classifications: Q54; M41; G32; G38; Q58. [ABSTRACT FROM AUTHOR]

This paper examines voluntary disclosure in the context of shareholder scrutiny of executive compensation contracts. We find that firms voluntarily increase discussion of their performance within their CD&A disclosures when peer-benchmarked compensation relative to performance is high. In contrast, we do not find a similar increase in performance discussion in the corresponding MD&A disclosures, which suggests that the effect is not driven by firms' general disclosure practices. We also find that the relation between relatively high compensation and CD&A performance disclosure strengthens following the implementation of mandatory Say-on-Pay, which increased costs associated with investor criticism of pay. These disclosures appear to be used effectively to avoid negative compensation assessments, in that they are associated with higher levels of shareholder and proxy advisor approval. Altogether, our findings suggest that CD&A performance disclosures allow firms to communicate the context of their compensation choices to improve shareholder opinions of pay. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: D22; J33; M41. [ABSTRACT FROM AUTHOR]

We examine whether the complexity of mandatory accounting disclosures prompts managers to voluntarily disclose adjusted measures of actual earnings performance, and whether this practice reflects attempts to obfuscate or mitigate the informational opacity accounting complexity creates for investors. Using the metadata in XBRL filings, we construct measures of accounting complexity that map directly to the mandated standards applied in financial statement filings. We find a positive and economically significant association between accounting complexity and managers' propensity to disclose non-GAAP earnings information. This relation is robust and incremental to common measures of business and linguistic complexity, and the transitory nature of firms' economic activities. We also find that the quality and informativeness of adjusted earnings information increases with accounting complexity, consistent with motives to better inform investors when accounting disclosures are complex. Overall, our results suggest that managers use non-GAAP earnings disclosure to mitigate the adverse informational effects of accounting complexity. Data Availability: All data are available from sources identified in the paper. JEL Classifications: M41; M43. [ABSTRACT FROM AUTHOR]

Disclosure theory predicts that the likelihood of voluntary disclosures increases with the noise level in mandatory disclosures. We test this prediction by exploiting a unique setting where firms simultaneously provide two forecasts of the same metric—annual effective tax rates (ETRs). We find that managers are more likely to issue voluntary ETR forecasts when mandatory ETR forecasts contain more noise due to tax complexity, suggesting that managers resort to voluntary disclosure when mandatory disclosure constrains their ability to convey private information. Using analysts' ETR forecast revisions to assess the informativeness of the two ETR forecasts, we find that both forecasts are incrementally informative. In addition, analysts weight voluntary ETR forecasts more heavily, especially when voluntary ETR forecasts are non-GAAP based and when discrete items are present. Overall, we provide evidence on the relation between and the informativeness of voluntary and mandatory disclosures by examining two competing forecasts issued simultaneously. [ABSTRACT FROM AUTHOR]

Structural equation modeling (SEM), an empirical methodology underutilized in archival research, enables researchers to examine paths linking constructs. SEM consists of two components: a measurement model that generates common factors from observed variables and a path model that links the factors. We discuss SEM's components, estimation, advantages, best practices, and limitations. We illustrate SEM with an application to disclosure research. Unlike some prior research, we find voluntary disclosure quality is negatively associated with cost of capital, both directly and indirectly through information asymmetry, even after controlling for earnings quality's direct and indirect associations with cost of capital. We believe SEM offers fruitful avenues for future research because it allows flexibility in modeling relations guided by theory, enables tests of underlying theoretical mechanisms, provides tools to address measurement error and missing data, and estimates simultaneous equations. SEM may be useful in settings that currently use path analysis or principal component analysis. Data Availability: Data used in this study are available from public sources identified in the paper. JEL Classifications: M41; C30. [ABSTRACT FROM AUTHOR]

This paper provides descriptive evidence about how startup firms communicate with investors on their Regulation Crowdfunding offering page. I find evidence, consistent with prior theory about processing costs and information salience, that a firm's prior revenues relate strongly to the discussion of financial information on its offering page. This runs counter to indications from Reg CF founders that they think financial information is of less importance to these investors than other information about the company. Consistent with founder beliefs that investors place little weight on firm financials, I find no consistent relation between financial disclosure and a firm meeting its offering goal. Offering success appears more closely related to other elements of disclosure that tell the "story" of the company. The results of this paper can help inform future research in the crowdfunding space, as well as contribute to the literature on how investors process information and disclosure. Data Availability: Publicly available from Regulation Crowdfunding filings on SEC Edgar. JEL Classifications: G23; G24; M13; M41. [ABSTRACT FROM AUTHOR]

We investigate the relationship between insider horizon and disclosure policy. First, we develop and analyze a rational expectations model assuming insiders are able to commit to a disclosure policy. Insiders with a short horizon prefer more disclosure and are willing to bear costs of disclosure to reduce information asymmetries among capital market participants. We then empirically test our predictions in the setting of newly public firms and firms where the CEO is approaching retirement. We find that firms with insiders that have a shorter horizon disclose more and experience lower information asymmetry. Our study contributes to the understanding of firms' disclosure choices by suggesting that the horizon of insiders shapes a firm's disclosure policy. JEL Classifications: G14; G32; D83. [ABSTRACT FROM AUTHOR]

Although the shareholder benefits of investor conferences are well-documented, evidence on whether these conferences facilitate managerial opportunism is scarce. We examine whether managers opportunistically exploit heightened attention around the conference to "hype" the stock. We find that (1) managers increase the quantity of voluntary disclosure leading up to the conference, (2) these disclosures are more positive in tone and increase prices to a greater extent than post-conference disclosures, and (3) these disclosures are more pronounced when insiders sell their shares immediately prior to the conference. In circumstances where pre-conference disclosures coincide with pre-conference insider net selling, we find evidence of a significant return reversal––large positive returns before the conference and large negative returns after the conference––and that the firm is more likely to be named in a securities class action lawsuit. Collectively, our findings are consistent with some managers hyping the stock prior to the conference. [ABSTRACT FROM AUTHOR]

We examine firm disclosure choice during the initial public offering (IPO) roadshow presentation to understand the informativeness of a management presentation designed to attract investors. Although firms submit a comprehensive registration filing during the IPO, managers also prepare a roadshow presentation, which is shorter and typically allows managers more autonomy to select the information released and how it is discussed. We find that IPO roadshows have significantly more positive, less negative, and less uncertain language than the SEC filing. Using machine learning to classify roadshow sentences into five major topics from the registration statement, we find that roadshows differ in both the topics selected and the language used within each topic. We then examine the predictive ability of the roadshow language, finding that roadshow language predicts future accounting performance, whereas filing language does not. These results highlight the informational role of management presentations, despite the flexibility they grant managers. JEL Classifications: M41; G10; M13. [ABSTRACT FROM AUTHOR]

Most research on non-GAAP financial measures focuses on earnings or earnings per share, although non-GAAP revenue disclosure has recently attracted SEC scrutiny. It is unclear ex ante what non-GAAP adjustments could improve revenue's usefulness because, unlike earnings, revenue is a top-line number related primarily to core (i.e., persistent) business activities. We present the first archival analysis of non-GAAP revenues using a large, hand-collected sample of disclosures from 2015 to 2018. Approximately one in five earnings announcements contains a non-GAAP revenue disclosure, focused on revenue growth. Our evidence suggests that firms disclose non-GAAP revenue when GAAP revenue is incomparable with prior periods, and not to compensate for poor GAAP performance. Furthermore, non-GAAP revenue growth predicts future revenue growth better than GAAP revenue growth, and the market responds to this information. Overall, non-GAAP revenue disclosures are motivated by economic fundamentals rather than opportunism, on average, and they provide investors with relevant information. [ABSTRACT FROM AUTHOR]

SYNOPSIS: We examine changes in voluntary disclosure of balance sheet and cash flow (BS/CF) information in earnings releases after restatement announcements. We consider these disclosures to be particularly relevant in the restatement context since they help investors interpret accruals and assess reporting quality at a time when information uncertainty is high. We find that BS/CF disclosures drop significantly for at least five quarters following restatement announcements, particularly for severe restatements and those restatements more likely to lead to litigation, and less for firms likely to benefit from reputation-repairing activities. We next consider the impact of BS/CF changes on earnings informativeness and find significantly lower post-restatement earnings response coefficients for firms ceasing BS/CF disclosure, but not otherwise. Overall, we argue that litigation concerns provide a strong disincentive for disclosure following restatement announcements. Our findings add to a growing literature on the importance of disaggregated BS/CF information in interpreting accruals. [ABSTRACT FROM AUTHOR]

We examine takeover auctions when an informed bidder has better information about the target value than a rival and target shareholders. The informed bidder's information is either hard or soft, and only hard information can be credibly disclosed. We show that withholding information creates a winner's curse, thereby serving as a preemption device that deters the rival's participation. In turn, an endogenous disclosure cost arises that induces the informed bidder to optimally withhold favorable information to minimize the acquisition price—breaking down the standard unraveling result, even if his information is always hard. Perhaps surprisingly, stronger competition from the uninformed bidder can reduce the target shareholders' payoff and increase the payoff of the informed bidder while unambiguously improving social welfare. Moreover, "hardened" information can reduce the gains to trade, decreasing welfare, but increasing shareholders' payoff. Our results provide a cautionary note to promoting more competition and more disclosure. JEL Classifications: D44; D82; G34; M41. [ABSTRACT FROM AUTHOR]

In order to deter aggressive tax planning, the Australian government mandated public disclosure of three line items from large corporations' tax returns. However, there is no evidence that the mandated disclosure led public firms to pay more taxes (Hoopes, Robinson, and Slemrod 2018). Instead, I find that firms strategically offset expected reputational costs by voluntarily issuing supplemental information. Specifically, when managers expect new reputational costs from the mandated tax return disclosure (wherein the disclosure reveals an unexpectedly low tax liability) and low proprietary costs from a supplemental voluntary disclosure (wherein the firm discloses its nonaggressive tax planning), firms are likely to voluntarily disclose information that both preempts and supplements the government's mandatory disclosure. Thus, when mandatory disclosures are incomplete, firms will voluntarily issue additional information to remain in control of their disclosure environments. [ABSTRACT FROM AUTHOR]

Theoretical work generally predicts a negative association between disclosure and risk premium, where additional disclosure reduces estimation risk or information asymmetry. However, empirical studies frequently report mixed results. Recent theoretical studies suggest that the association between disclosure and risk premium is not necessarily always negative, and could be positive (or less negative). For example, Dutta and Nezlobin (2017) show that disclosure can be associated with higher risk premium when conditioned on a firm's growth rates. Similarly, Johnstone (2016) shows that higher signal quality can lead to higher risk premium. Motivated by these studies, we re-examine the association between disclosure and risk premium, conditional on growth. Using various proxies for risk premium, disclosure, and growth, we provide robust evidence that while the unconditional association between disclosure and risk premium is ambiguous, the conditional association is negative for lower growth firms but is less negative (or positive) for higher growth firms. Data Availability: Additional analyses are available from the authors upon request. JEL Classifications: M41; G12. [ABSTRACT FROM AUTHOR]

We predict and find that regulated firms' mandatory disclosures crowd out unregulated firms' voluntary disclosures. Consistent with information spillovers from regulated to unregulated firms, we document that unregulated firms reduce their own disclosures in the presence of regulated firms' disclosures. We further find that unregulated firms reduce their disclosures more the greater the strength of the regulatory information spillovers. Our findings suggest that a substitutive relationship between regulated and unregulated firms' disclosures attenuates the effect of disclosure regulation on the market-wide information environment. JEL Classifications: D82; G38; K22; M41. [ABSTRACT FROM AUTHOR]

We investigate how institutional (non-commercial bank) investors that simultaneously invest in a firm's debt and equity (dual-holders) influence the firm's voluntary disclosure. Because institutional dual-holders trade on private information gleaned through lending relationships, we predict and find that borrowers increase earnings forecast disclosure to reduce these investors' information advantage following the origination of loans with their participation. We also show that the increase in disclosure is stronger when the access to a borrower's private information endows dual-holders with a greater information advantage and when the consequences of this access are likely to be more pronounced. We further find that institutional dual-holders earn excess returns when trading equity of non-guider firms following loan origination, but not when firms issue guidance, confirming that earnings disclosure helps level the playing field among investors. Our findings highlight that firms actively use disclosure to mitigate the adverse effect of dual-holders on their information environment. [ABSTRACT FROM AUTHOR]

A firm's stock price may reveal information to a variety of participants, including its strategic partners and competitive rivals. This paper establishes that when a firm discloses cost information it can confound decision-relevant demand information embedded in the stock price that observers can otherwise extract. With stock price valuing firm profit (not cost and revenue separately), a disconnect is introduced between the firm's actions and its intent—it discloses more (less) on one dimension when its intent is to conceal (reveal) on another. Moreover, the firm's intent can be to either reveal or conceal information depending on what gives its partner the best competitive edge over its rival. Consequently, a firm's disclosure is made strategically, incorporating both valuation and competitive effects. Interestingly, the firm's disclosure strategy is designed in close concert with its production decision, i.e., the firm's optimal accounting and real decisions interact with each other for maximum impact. [ABSTRACT FROM AUTHOR]

We find that corporate credit rating changes have an effect on firms' voluntary disclosure behavior that is independent of the information they convey about firm fundamentals. Our analyses exploit two separate quasi-experimental settings that generate either exogenous credit rating downgrades or credit rating upgrades (i.e., credit rating label changes). We find evidence of a negative relation between the direction of the credit rating label change and the provision of voluntary disclosure in both settings—firms respond to exogenous downgrades by increasing voluntary disclosure and to exogenous upgrades by decreasing voluntary disclosure. The effects we document are attributable to the regulatory role rather than the information role of credit ratings. Overall, our analyses indicate that credit rating agencies as gatekeepers influence firms' provision of voluntary disclosure. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G15; G18; M41. [ABSTRACT FROM AUTHOR]

I use computational linguistic techniques to study the content, determinants, and stock market consequences of conference calls that are not held in conjunction with quarterly earnings releases (hereafter, non-earnings conference calls). I find that large firms, loss firms, firms with more volatile earnings and returns, and firms with complex operations and a greater number of analysts following hold more non-earnings conference calls. Firms with volatile earnings and greater operational complexity discuss more earnings, investment, and market-related topics in non-earnings conference calls. These results are consistent with the notion that firms facing greater informational problems hold more non-earnings conference calls. I also find that controlling for other disclosure types, non-earnings conference calls incrementally explain quarterly abnormal stock returns, suggesting that they indeed help improve firms' information environment. Data Availability: Data are available from the public sources cited in the text. [ABSTRACT FROM AUTHOR]

We investigate whether common compensation features encourage managers to reveal their private information. Assuming managers have private knowledge of future earnings, we use management forecast accuracy to proxy for the extent to which managers reveal private information and offer two main findings. First, both the amount of a manager's severance pay and the convexity of their stock option portfolio (i.e., vega) are positively associated with forecast accuracy. This suggests managers are more forthcoming if compensated in ways that reduce concerns over firm volatility. Second, these incentives are more strongly associated with forecast accuracy when short-term pressure to conceal private information is higher. Additional analyses suggest these results are unlikely explained by earnings management subsequent to the forecast, managers with these incentives issue less optimistically biased forecasts, and these contracts increase forecast accuracy of good and bad news. Overall, our results suggest compensation can encourage managers to provide more accurate disclosures. [ABSTRACT FROM AUTHOR]

We examine the voluntary disclosure behavior of peer firms of hostile takeover targets. We find that peer firms under control threat use a disclosure strategy that emphasizes bad news: they provide more bad news forecasts, tend to bundle bad news forecasts with earnings announcements, use more negative tone in conference call presentations, and more evenly distribute negative tonal words throughout the presentation to heighten the visibility of bad news. This asymmetric disclosure of bad news is concentrated in firms whose managers have greater incentives to mitigate the control threat—firms with younger CEOs, CEOs with higher total compensation, and firms with weaker anti-takeover provisions. Further tests show that peer firms also manage accruals downward. We contribute to the sparse literature on the impact of corporate control contests on voluntary disclosure by demonstrating that peer firms under control threat emphasize bad news to preempt control threat. JEL Classifications: G14; G32; M4; M41. [ABSTRACT FROM AUTHOR]

Public information that becomes available after a manager's initial voluntary disclosure decision creates incentives for her to reconsider and possibly change that decision. We show that if she has private information that is value-relevant or that impacts the firm's ability to compete in its product market, the option to revise an initial disclosure decision in the face of a public release of information alters both the initial decision and the overall frequency of disclosure. These effects are amplified if she believes that public information arrival is more likely or if the firm's value is more sensitive to it. We also show that an increase in the initial disclosure cost reduces the probability of an initial disclosure and increases the probability of a subsequent disclosure. These effects are reversed if the cost of a subsequent disclosure increases. [ABSTRACT FROM AUTHOR]

We investigate the joint effects of auditors' reporting choice and audit committee effectiveness on management disclosures about complex estimates. A new PCAOB standard requires auditors to report on Critical Audit Matters (CAMs): issues "communicated or required to be communicated to the audit committee" about accounts or disclosures that (1) "are material to the financial statements," and (2) "involved especially challenging, subjective, or complex auditor judgment" (PCAOB 2017a, 11). Consistent with investor arguments, we find that audit committee effectiveness and more detailed CAM reporting encourage managers' disclosures of the risk underlying complex estimates. When the auditor's report is more informative about a complex estimate and the audit committee is more effective, management's related financial disclosures are more forthcoming. However, less informative auditor disclosures or more effective audit committees alone do not prompt greater management disclosure. Thus, expanded auditor reporting and more effective audit committees, together, can enhance the disclosures investors value. [ABSTRACT FROM AUTHOR]

Prior literature presents various perspectives on the role of financial reporting. One view is that mandatory periodic reporting disciplines managers and encourages timely voluntary disclosure. We examine this "confirmation hypothesis" using the shock to financial reporting quality experienced by Arthur Andersen clients forced to switch auditors. Consistent with the confirmation hypothesis, we find that former Andersen clients increase disclosure after they change auditors. They increase forecasting frequency and enhance forecasting precision and specificity. We present additional cross-sectional evidence that shows Arthur Andersen clients with larger increases in financial reporting quality increased their disclosure by relatively more, even within the sample of Arthur Andersen clients. We supplement our main findings with a battery of tests to reduce the possibility that alternative shocks and uncertainty drive our results. Our findings support complementarity between financial reporting quality and voluntary disclosures. [ABSTRACT FROM AUTHOR]

We examine how product market competition affects the disclosure of innovation. Theory posits that product market competition can cause firms to increase their disclosure of innovation to deter product market competitors. Consistent with this reasoning, we find that patent applicants in more competitive industries voluntarily accelerate their patent disclosures, which are credibly disclosed via the United States Patent and Trademark Office. Our inferences are robust to using changes in industry-level import tariffs as sources of plausibly exogenous variation in product market competition in difference-in-differences designs. Consistent with patent disclosure deterring product market competitors, we find that timelier patent disclosures are more strongly associated with declines in the similarity of competitors' products than are less timely patent disclosures. In total, our results suggest that product market competition increases patent disclosure timeliness, which is consistent with firms using the disclosure of innovation to deter product market competition. JEL Classifications: D23; G38; O30; O31; O33; O34; O38. [ABSTRACT FROM AUTHOR]

Prior literature suggests that voluntary disclosures of forward-looking information tend to lead to capital market benefits, but these disclosures may also result in negative capital market consequences if subsequent performance falls below expectations. We, therefore, hypothesize that convex equity incentives, which reward managers for stock price gains while limiting their exposure to losses, should promote greater voluntary forward-looking disclosure. Consistent with our hypothesis, we find a significantly positive association between equity incentive convexity and forecast issuance and frequency. We also find that the positive association is more pronounced for firms with higher sales volatility and managers with shorter tenure, in which cases managers are more concerned with missing their own forecasts. Our study suggests that the risks arising from providing voluntary disclosures are important considerations in managers' disclosure decisions. JEL Classifications: M41. [ABSTRACT FROM AUTHOR]

We examine whether chief executive officer compensation aligned with stakeholders' interests is associated with enhanced corporate carbon transparency. Using an international sample obtained from the CDP, we find that corporate carbon transparency—as measured by both the propensity to voluntarily disclose carbon information and the quality and comprehensiveness of the disclosure—is greater when managers' compensation contracts are better aligned with stakeholder interests. Further analyses indicate that this positive relationship is stronger in countries or regions with a code law legal system, with an inefficient rule of law, that show strong social norms toward climate change, that feature collectivist societies, and that have a long-term orientation. These findings indicate that the stakeholder agency problem of voluntary carbon disclosure can be addressed through executive incentives that are aligned with stakeholders' interests. [ABSTRACT FROM AUTHOR]

We find that firms are less likely to disclose information regarding a negative economic event for which the firm is likely to be blamed than a negative event for which the firm is likely to be perceived as blameless. We identify 383 material negative events (casualty accidents, oil spills, catastrophes, investor class action lawsuits) and find that firms are approximately four times less likely to disclose information following a negative blamed event than a blameless event. Consistent with disclosure of blamed events resulting in greater costs to the firm, we find that firms that disclose after a blamed, but not a blameless, event experience greater reputation and litigation costs than firms that do not disclose. We find that blame attribution provides incremental information over manager career concerns in the disclosure decision. These findings suggest that an event-specific factor—blame attribution—affects firms' propensity to provide disclosures about negative economic events. Data Availability: The list of 383 material negative economic events is available upon request. JEL Classifications: K22; M41. [ABSTRACT FROM AUTHOR]

This paper studies equilibrium voluntary disclosures for a company financed with both debt and equity, where the firm's manager is compensated based on a linear combination of the market prices of the firm's equity and enterprise values (i.e., the sum of its values of equity and debt). Such compensation policies span "all equity" contracts, "all debt" contracts, and "all enterprise value" contracts. We show: (1) under both "all equity" and "all debt" contracts, increased debt always leads to reduced voluntary disclosure; (2) under "all enterprise value" contracts, increased debt has no effect on voluntary disclosure; (3) for all contracts that place positive weight on both equity and enterprise values, more debt leads to less (respectively, more) disclosure if the initial debt level is low (respectively, high); (4) increasing the weight on equity prices always induces less disclosure, so: (5) "all equity" contracts minimize disclosures, and "all debt" contracts maximize disclosures. [ABSTRACT FROM AUTHOR]

We examine a form of voluntary disclosure that has received limited attention to date, namely, managers' long-term guidance for earnings three to five years in advance. We identify 1,739 long-term earnings forecasts issued by 295 unique firms from 2000 to 2012 and find that relative to firms that issue only short-term earnings guidance, those that also issue long-term guidance are larger, have more certain operating environments, and are followed by analysts who are more likely to issue long-term growth forecasts. Long-term guidance is informative to investors and analysts incorporate the news contained in these forecasts into their own long-term growth forecasts. We also document that the issuance of long-term guidance is associated with more (less) investor focus on long-term (short-term) earnings news. Last, we find mixed evidence on the association between long-term guidance and real earnings management decisions. Our study adds to the literature on managers' voluntary disclosure choices. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G17; M41. [ABSTRACT FROM AUTHOR]

SUMMARY: In response to cybersecurity risk and demand for information about organizations' cybersecurity risk management programs, the American Institute of Certified Public Accountants (AICPA) recently released a cybersecurity risk management examination service. We examine the effect of joint or separate provisioning of this service on investors' perceptions and decisions, and whether these effects differ when a subsequent cybersecurity incident occurs. We find that the negative signal of a subsequent cybersecurity incident reverses investors' positive perceptions of auditor competence and increases investors' sensitivity to potential independence impairments when the cybersecurity is jointly provisioned, leading to lower perceptions of audit quality. We also find that investors are less willing to invest when the examination is jointly provisioned compared to separately provisioned. Our results provide important insights to the literature and to purchasers and regulators by examining an emerging non-audit service and how a signal of non-audit service quality can affect perceptions of audit quality. [ABSTRACT FROM AUTHOR]

The government requires its suppliers to have certain internal information processes to reduce uncertainty about their ability to fulfill their commitments. I argue that these requirements improve suppliers' internal information, which leads to better external reporting. Using a dataset of U.S. government contracts, I find a positive relation between government contract awards and firms' external reporting quality. Consistent with procurement-related requirements driving this relation, I find that firms improve their external reporting when they begin contracting with the government, and that the magnitude of the improvement varies predictably with contract characteristics imposing greater requirements on contractors' internal information processes. Finally, I use the establishment of the Cost Accounting Standards Board in 1970 as a shock to contractors' internal information requirements, and find greater improvements in external reporting among firms subject to the CASB. Overall, these results suggest that the government as a customer contributes to shaping firms' information environments. [ABSTRACT FROM AUTHOR]

Successful innovations could induce more disclosure if the information asymmetry between the firm and its investors about post-innovation outcomes leads investors to demand more information. However, such innovations also likely entail greater proprietary cost concerns, which deter disclosure. This paper uses patent grants to examine the effect of innovation success on management guidance behavior. We find that more management guidance follows patent grants, suggesting that despite disclosure cost concerns, firms with successful innovations do respond to information demand. This association is stronger after enactment of Regulation Fair Disclosure and for firms with greater institutional investor ownership, further highlighting the role of information demand. The association is weaker for firms with more competition, consistent with proprietary cost concerns having a moderating impact. Overall, our findings suggest that innovation creates demand for more voluntary disclosure, and firms' disclosure decisions following innovation outcomes vary in ways that disclosure theory and economic intuition predict. JEL Classifications: G30; G32; G38; M41; M48. Data Availability: All data are available from the public sources identified in the paper. [ABSTRACT FROM AUTHOR]

We introduce real decisions (a project choice decision, an investment scale decision, and an information acquisition decision) to the Dye (1985) voluntary disclosure framework and examine how the prospect of voluntary disclosure affects managers' real decisions. Riskier projects lead to more volatile environment and hence entail higher efficiency loss at the subsequent investment scale decision stage if managers are uninformed. If managers are informed, they can withhold bad information, and the value of this option is higher for riskier projects. We show that the voluntary nature of managers' disclosure may lead to two types of inefficiencies: (1) managers may choose riskier projects, which generate lower expected cash flow due to the higher efficiency loss at the subsequent decision stage, and (2) managers may over-invest in information acquisition, because informed managers with bad information have the option to pool with uninformed managers and benefit from being overpriced. [ABSTRACT FROM AUTHOR]

We examine the relation between information externalities along the supply chain and voluntary disclosure. Information transfers from a major customer's earnings announcement (EA) can substitute for its supplier's disclosure. Conversely, if the customer's EA increases uncertainties regarding the supplier's future prospects, it can increase the demand for disclosure. After controlling for information incorporated in supplier returns, we find that the supplier is more likely to issue earnings guidance after the customer's EA when the EA news deviates more from the market's expectation. The positive effect of the customer's news on earnings guidance is weaker when common investors, supply-chain analysts, or a common industry allow investors to better understand the value implications of the news, while the effect increases with the importance of the customer to the supplier. The effect is also stronger when EA news is negative rather than positive. Collectively, the results suggest that supply-chain relationships influence voluntary disclosure. Data Availability: All data are publicly available from sources indicated in the text. [ABSTRACT FROM AUTHOR]

I study the information content of management voluntary disclosures disciplined by shareholder litigation. I model the litigation mechanism in which legal liabilities are based on the damages that shareholders suffer from buying a stock at an inflated price. I find that management does not fully reveal private information in equilibrium. Instead, their disclosures reveal only a range in which their private information lies. Thus, the precision of information is, to some extent, lost. Notably, increasing the severity of legal liability does not always reduce the loss of precision. In fact, when the legal liability reaches a certain level, more severe legal liability will result in less precise disclosures. I also find that good news and bad news have different precision. Specifically, good news is more precise than is bad news when legal liabilities are high, and bad news is more precise than is good news when legal liabilities are low. [ABSTRACT FROM AUTHOR]

We investigate the relationship between societal trust and managers' decisions to voluntarily issue earnings forecasts. We reason that managers are more likely to issue earnings forecasts in high-trust countries than in low-trust countries because investors view these voluntary disclosures as more credible information about the firm's future profitability. We find evidence consistent with these predictions, suggesting that societal trust fosters corporate voluntary disclosure. We also document that societal trust works as a substitute for country-level formal institutions in terms of its implications for management earnings forecast (MEF) issuance. Additionally, we find a stronger relationship between firm-level commitment to credible disclosure and MEFs in low-trust countries, suggesting that country-level societal trust relates to the effectiveness of firm-level credibility-enhancing mechanisms. Finally, we show that firms from countries with higher societal trust issue more precise and accurate MEFs that contain more information about multiple items. [ABSTRACT FROM AUTHOR]

We estimate a dynamic model of voluntary disclosure, using annual management forecasts of earnings, that features a manager with price motives and an uncertain, but persistent, information endowment. Our estimates imply that: (1) managers face disclosure frictions 35 percent of the time; (2) conditional on being informed, managers withhold information 17 percent of the time; and (3) conditional on being silent, managers possess information 24 percent of the time. Managers' strategic withholding motives increase investors' uncertainty about earnings by 3 percent. We find that managers' price motives reduce strategic withholding by one-third in response to investors' increased skepticism in the event of non-disclosure. JEL Classifications: D82; D83; G17. [ABSTRACT FROM AUTHOR]

SYNOPSIS: This paper examines whether a firm's degree of conservatism in financial reporting is associated with its voluntary nonfinancial corporate social responsibility (CSR) disclosures and the stock price reaction to such disclosures. Theoretical and empirical studies find that the amount of voluntary disclosures and their credibility vary depending on the degree of financial reporting conservatism. We expand this line of questioning and find that firms that adopt conservative financial reporting are less likely to disclose CSR information. Further analyses show that the market reaction to a firm's CSR disclosure is reduced when its financial reporting is more conservative. Our evidence suggests that the quantity and quality of CSR disclosures are associated with the degree of accounting conservatism. Therefore, stakeholders should consider a firm's financial reporting policies when interpreting CSR disclosures. JEL Classifications: M40; M41. Data Availability: The data used in this study were taken from public sources identified in the paper. [ABSTRACT FROM AUTHOR]

We examine a possible mechanism by which the lender can evaluate the borrower's ability to produce accurate forward-looking information. Forward-looking information is important to lenders to project the borrower's future performance and the loan's expected payoff. However, unlike historical financial statements, forward-looking information cannot be verified by lenders or external auditors. We contend that the borrower's past forecast accuracy provides a measure that allows the lender to assess the borrower's ability to produce accurate forward-looking information, allowing the lender to gain greater confidence in the borrower's projections of future value. Consistent with this argument, we find that the borrower's past forecast accuracy is negatively associated with the loan's initial interest spread. We also find that this relation is concentrated among non-relationship loans and borrowers with greater earnings volatility. Finally, we find that debt contracts to borrowers with more accurate managerial forecasts exhibit less interest rate mispricing. JEL Classifications: G30; M40; M41. [ABSTRACT FROM AUTHOR]

SUMMARY: Under Rule 29, the Public Company Accounting Oversight Board (PCAOB) requires principal auditors to disclose the extent of use of other auditors on an audit engagement. This mandatory disclosure occurs on Form AP, available on the PCAOB's website. Principal auditors may voluntarily disclose this same information in an appendix to the audit report. We experimentally examine how the joint effects of the principal auditor's extent of use of other auditors and their use of voluntary disclosure influence investors' perceptions of audit quality. Results indicate that investors perceive audit quality to be lowest when principal auditors use other auditors to a greater extent and only file the mandatory disclosure. We find voluntary disclosure in the audit report attenuates the perceived effect of using other auditors. Additionally, after a restatement, investors place no additional blame or liability on principal auditors that use other auditors to a greater extent or choose voluntary disclosure. [ABSTRACT FROM AUTHOR]

We examine the impact of foreign institutional investors on firms' voluntary disclosure practices measured by management forecasts. In a sample of 32 non-U.S. countries, we find that, on average, foreign institutional investments lead to improved voluntary disclosure, and their impact is larger than that of domestic institutional investors. These results are more pronounced when foreign institutional investors (1) are unfamiliar with the firm's home country, (2) have longer investment horizons, and (3) are from countries with stronger investor protection and disclosure requirements than the firm's home country. However, we also find some evidence of voluntary disclosure deterioration in firms with foreign institutional investors from countries with inferior disclosure requirements and securities regulations and with concentrated foreign institutional ownership. Overall, our results suggest that the relation between foreign institutional investors and voluntary disclosure is much richer and more complex than what has been documented for domestic institutional investors in the literature. [ABSTRACT FROM AUTHOR]

This paper examines changes in firms' disclosure behavior around cross-listings. Using an international setting, we find significant differences in management forecast likelihood and frequency between cross-listed firms and firms with similar characteristics but that are not cross-listed; particularly when differences in accounting standards between a cross-listed firm's home and target countries are larger. Further, we find that firms choosing to cross-list in target countries with larger accounting standards differences tend to provide more voluntary disclosure during the two years preceding a new cross-listing, rather than during the earlier time periods or the period after cross-listing, and such voluntary disclosure helps firms attract more foreign institutional ownership in their cross-listing target countries. Collectively, our evidence suggests that although differences in accounting standards across countries deter firms' cross-listing activities, cross-listed firms, by providing more management forecasts voluntarily, preemptively alleviate the information disadvantage faced by foreign institutional investors. [ABSTRACT FROM AUTHOR]