A simple structural estimator of disclosure costs

E. Cheynel () and M. Liu-Watts ()
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E. Cheynel: University of California San Diego
M. Liu-Watts: Hunter College CUNY

Review of Accounting Studies, 2020, vol. 25, issue 1, No 6, 245 pages

Abstract: Abstract This study recovers a simple firm-level measure of disclosure costs implied by the voluntary disclosure theory of Verrecchia (Journal of Accounting and Economics 12(4), 365–380, 1990). The measure does not require knowledge by the researcher of the distribution of private information and can be implemented with three simple observable inputs: the minimum, average, and frequency of disclosure. We document a positive association of disclosure costs with proxies for existing and potential competition, information asymmetry, and insider trading. Higher values of disclosure costs are associated with lower contemporaneous and future disclosures as well as lower propensity to disclose in holdout samples. Overall, we provide future researchers with an easy-to-implement procedure to structurally estimate unobserved firm-level disclosure costs.

Keywords: Voluntary disclosures; Disclosure costs; Proprietary costs; Structural estimation; Management forecasts (search for similar items in EconPapers)
JEL-codes: C14 D21 D22 D83 G14 M4 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11142-019-09511-1

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