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Voluntary disclosures and information production by analysts

Nisan Langberg and K. Sivaramakrishnan

Journal of Accounting and Economics, 2008, vol. 46, issue 1, 78-100

Abstract: We analyze the voluntary disclosure decision of a manager when analysts scrutinize the quality of disclosure. We derive an equilibrium in which managers voluntarily disclose unfavorable information only if sufficiently precise, but disclose favorable news with lower levels of accuracy. We show that analysts cover good news disclosures with higher scrutiny. To the extent analysts rely on mandatory financial reports to interpret voluntary disclosures, we show that more precise financial reports may lead to more precise but less frequent voluntary disclosures. Moreover, a slant toward conservatism in financial reports can lead to less precise yet more frequent voluntary disclosures.

Keywords: Voluntary; disclosure; Conservatism; Accounting; precision; Financial; analysts (search for similar items in EconPapers)
Date: 2008
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Journal of Accounting and Economics is currently edited by J. L. Zimmerman, S. P. Kothari, T. Z. Lys and R. L. Watts

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