Biased voluntary disclosure

Eti Einhorn () and Amir Ziv ()
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Eti Einhorn: Tel Aviv University
Amir Ziv: Columbia University

Review of Accounting Studies, 2012, vol. 17, issue 2, No 7, 420-442

Abstract: Abstract We provide a bridge between the voluntary disclosure and the earnings management literature. Voluntary disclosure models focus on managers’ discretion in deciding whether or not to provide truthful voluntary disclosure to the capital market. Earnings management models, on the other hand, concentrate on managers’ discretion in deciding how to bias their mandatory disclosure. By analyzing managers’ disclosure strategy when disclosure is voluntary and not necessarily truthful, we show the robustness of voluntary disclosure theory to the relaxation of the standard assumption of truthful reporting. We also demonstrate the sensitivity of earnings management theory to the commonly made mandatory disclosure assumption.

Keywords: Financial accounting; Asymmetric information; Voluntary disclosure; Reporting bias; Earnings management (search for similar items in EconPapers)
JEL-codes: D82 G14 M41 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/s11142-011-9177-0

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