Download or read book Voluntary Disclosure and Information Asymmetry written by Nemit Shroff and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In 2005, the SEC enacted the Securities Offering Reform (Reform), which relaxes 'gun jumping' restrictions, thereby allowing firms to more freely disclose information before equity offerings. We examine the effect of the Reform on voluntary disclosure behavior before equity offerings and the associated economic consequences. We find that firms provide significantly more pre-offering disclosures after the Reform. Further, we find that these pre-offering disclosures are associated with a decrease in information asymmetry and a reduction in the cost of raising equity capital. Our findings not only inform the debate on the market effect of the Reform, but also speak to the literature on the relation between voluntary disclosure and information asymmetry by examining the effect of quasi-exogenous changes in voluntary disclosure on information asymmetry, and thus a firm's cost of capital.

Download or read book Ethics and Sustainability in Accounting and Finance Volume III written by Kıymet Tunca Çalıyurt and published by Springer Nature. This book was released on 2021-10-04 with total page 344 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book continues the discussion on recent developments relating to ethical and sustainable issues in accounting and finance from the book , Volumes I and II, looking into topics such as the importance of good governance in accounting, tax, auditing and fraud examination, ethics, sustainability, environmental issues and new technologies and their effects on accounting and finance, focusing in particular on environmental and sustainability reporting in the oil and gas and banking sectors. The book also considers the growing importance of audit quality in this time of the COVID-19 pandemic.

Download or read book Voluntary Disclosure and Information Asymmetry in Denmark written by and published by . This book was released on 2006 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Voluntary Disclosure During Equity Offerings written by Mark H. Lang and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine corporate disclosure activity around seasoned equity offerings and its effect on stock prices. If a firm's disclosures can increase the proceeds from security issuance, either by reducing information asymmetry or by "hyping" the stock, it will enjoy a lower cost of equity capital at the issuance. Potentially offsetting this incentive, the 1933 Securities Act restricts certain disclosure activities prior to equity offerings. Beginning six months before the offering, our sample of issuing firms dramatically increase their disclosure activity relative to control firms, particularly for the categories of disclosure over which firms have the most discretion. The increase is significant after controlling for the firm's current and future earnings performance and is largest for firms with selling shareholders participating in the offering. However, there is no change in the frequency of forward-looking statements prior to the equity offering, which is expressly prohibited by the securities law. Firms that maintain a consistently high level of disclosure enjoy price increases prior to the offering and only minor price declines at the offering announcement, consistent with disclosure reducing the information asymmetry inherent in the offering. Firms that substantially increase their disclosure activity in the six months prior to the offering also enjoy price increases prior to the offering but suffer much larger price declines at the announcement of their intent to issue equity, consistent with the disclosure increase being used to "hype the stock" and the market partially correcting for the earlier price increase. Firms that maintain a consistently high disclosure level have no unusual return behavior subsequent to the announcement, while the firms that "hyped" their stock continue to suffer negative returns, reinforcing the conclusion that the increased disclosure activity was indeed "hype," but also demonstrating that the hype was successful in lowering the firms' cost of equity capital.

Download or read book Voluntary Disclosure Information Asymmetry and Insider Selling Through Secondary Equity Offerings written by Christine I. Wiedman and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relation of voluntary disclosure of management earnings forecasts and information asymmetry to insider selling through secondary equity offerings. We hypothesize that the pattern of voluntary disclosure and level of information asymmetry prior to secondary equity offerings differs systematically based on the identity of the seller. Specifically, we predict a greater frequency of voluntary disclosure and decreased level of information asymmetry when managers sell their stock through a secondary offering. We examine this hypothesis in a cross-sectional analysis of 210 secondary equity offerings from 1984-91, using a two-stage conditional maximum likelihood simultaneous equations estimation procedure, which allows for possible endogeneity in the manger?s decision to sell stock. Consistent with our predictions, we document a significantly positive association between managerial participation and voluntary disclosure of earnings forecasts in the nine-month period prior to registration of the offering. We also document a significantly negative association between managerial participation and two proxies for information asymmetry. The findings provide evidence that managers act as if reduced information asymmetry correlates with a reduced cost of capital.

Download or read book Regulation Fair Disclosure and Information Asymmetry written by Vesna Straser and published by . This book was released on 2002 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: With the institution of Regulation Fair Disclosure (FD) on October 23, 2000, the Securities and Exchange Commission (SEC) imposed higher transparency requirements on the voluntary disclosure practices of public companies. This paper investigates whether the regulation induced companies to commit to higher or lower levels of voluntary disclosures by studying the changes in information asymmetry. The analysis is based on the extant economic theory suggesting that increases in the quantity and/or quality of disclosures should reduce companies' levels of information asymmetry. We study two proxies of information asymmetry - the probability of informed trading and the adverse selection component of the spread. After the implementation of Regulation FD we find a significant increase in both proxies of information asymmetry and the probability of new information events that contain private information while the proportion of informed traders decreases. An analysis of the volume of disclosures shows that the regulation was successful in increasing the quantity of available public information. Combined with the previous results we are able to conclude that, at least initially, companies responded to the regulation by providing more public information of lower quality.

Download or read book Voluntary Disclosure and Equity Offerings written by Mark H. Lang and published by . This book was released on 2012 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine corporate disclosure activity around seasoned equity offerings and its relation to stock prices. Beginning six months before the offering, our sample issuing firms dramatically increase their disclosure activity, particularly for the categories of disclosure over which firms have the most discretion. The increase is significant after controlling for the firm's current and future earnings performance and tends to be largest for firms with selling shareholders participating in the offering. However, there is no change in the frequency of forward-looking statements prior to the equity offering, something that is expressly discouraged by the securities law.Firms that maintain a consistent level of disclosure experience price increases prior to the offering and only minor price declines at the offering announcement relative to the control firms, suggesting that disclosure may have reduced the information asymmetry inherent in the offering. Firms that substantially increase their disclosure activity in the six months prior to the offering also experience price increases prior to the offering relative to the control firms, but suffer much larger price declines at the announcement of their intent to issue equity, suggesting that the disclosure increase may have been used to quot;hype the stockquot; and the market may have partially corrected for the earlier price increase. Firms that maintain a consistent disclosure level have no unusual return behavior relative to the control firms subsequent to the announcement, while the firms that quot;hypedquot; their stock continue to suffer negative returns, providing further evidence that the increased disclosure activity may have been quot;hype,quot; and suggesting that the quot;hypequot; may have been successful in lowering the firms' cost of equity capital.

Download or read book Voluntary Disclosure in Asymmetric Contests written by Christian Ewerhart and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the incentives for interim voluntary disclosure of verifiable information in probabilistic all-pay contests with two-sided incomplete information. Private information may concern marginal cost, valuations, and ability. Our main result says that, if the contest is uniformly asymmetric, then full revelation is the unique perfect Bayesian equilibrium outcome. This is so because the weakest type of the underdog reveals her type in an attempt to moderate the favorite while, similarly, the strongest type of the favorite tries to discourage the underdog - so that the contest unravels. This strong-form disclosure principle is robust with respect to correlation, partitional evidence, randomized disclosures, sequential moves, and continuous type spaces. Moreover, the assumption of uniform asymmetry is not needed when incomplete information is one-sided. However, the principle breaks down when contestants are potentially too similar in strength, possess commitment power, or when information is unverifiable. In fact, cheap talk will always be ignored, even if mediated by a trustworthy third party.

Download or read book The Effects of Information Asymmetry on Voluntary Disclosures by Banks written by Dorothy Lee Warren and published by . This book was released on 1996 with total page 362 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.

Download or read book Accounting Disclosure and Real Effects written by Chandra Kanodia and published by Now Publishers Inc. This book was released on 2007 with total page 105 pages. Available in PDF, EPUB and Kindle. Book excerpt: Kanodia presents a new approach to the study of accounting measurement that argues that how firms' economic transactions, earnings, and capital flows are measured and reported to the capital markets has substantial effects on the firms' real decisions and on the allocation of resources.

Download or read book Investor Access to Conference Call Disclosures written by Shyam V. Sunder and published by . This book was released on 2002 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study provides evidence on the impact of the Securities and Exchange Commission's (SEC) Regulation Fair Disclosure (Reg. FD) on information asymmetry. Reg. FD prohibits firms from disclosing quot;materialquot; information selectively to analysts and institutional investors. The regulation has triggered a debate on mainly three issues: (a) whether use of nonpublic channels for selective disclosure (such as, analyst conference calls) results in information asymmetry among investors, (b) whether prohibiting nonpublic communications is contributing to leveling of information asymmetry among investors, and (c) whether Reg. FD has caused firms to reduce the quality of their public voluntary disclosures. The present study addresses all of these issues. I use a sample of earnings conference calls and classify firms as either, (1) quot;openquot; firms, which always held conference calls accessible to all investors; or (2) quot;restrictedquot; firms, which held conference calls for only analysts and institutional investors in the pre- Reg. FD period. I find that restricted firms faced higher information asymmetry compared to open firms in the pre- Reg. FD period. However, in the post- Reg. FD period the differences in information asymmetry between open and restricted firms do not persist. Taken together it suggests that selective disclosure was causing greater information asymmetry among investors and Reg. FD has contributed to the leveling of such information asymmetry. In additional tests, I do not find evidence that Reg. FD has caused firms to reduce quality of information conveyed in conference calls. The study adds to our understanding of how voluntary and mandated disclosure impact information asymmetry among investors.

Download or read book The Expected Costs of Increased Disclosure Firm and Industry specific Forces written by Simon Kröger and published by GRIN Verlag. This book was released on 2020-08-05 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2020 in the subject Business economics - Accounting and Taxes, grade: 1.0, Mannheim University of Applied Sciences, language: English, abstract: A series of financial crises and corporate scandals gave rise to increasing concerns about prevailing models of corporate governance and disclosure and stimulated financial disclosure and reporting regulation. As a result, there has been considerably more interest in documenting the benefits of increased disclosure than its costs. Accordingly, numerous papers purport to provide evidence of capital market benefits through incremental disclosure. At the same time, firms refrain from voluntarily committing to increased disclosure, implying that there must be a trade-off between associated benefits and costs. Consequently, critics contend that the capital market benefits are inconclusive. Instead, increased disclosure may result in adverse capital market effects through increasing information asymmetry. Moreover, critics predict that increased disclosure imposes further costs on the firm. The purpose of this seminar thesis is to review existing literature on these expected costs of increased disclosure. Thereby, I focus on controversies regarding the heavily debated capital market effects as well as on specific forces that determine proprietary and litigation costs associated with increased disclosure. While a firm’s disclosure choices likely are a joint outcome of market forces and incentives provided by regulation, the seminar thesis is limited to voluntary disclosure choices as a starting point for possible disclosure regulation. The remainder of the seminar thesis is structured as follows. Section 2 reviews the literature on the capital market effects of voluntary disclosure through its impact on information asymmetry. Section 3 discusses the ambiguous impact of voluntary disclosure on litigation and proprietary costs. Section 4 concludes the seminar thesis.

Download or read book An Investigation of the Causal Effect of Voluntary Disclosure Quality on Cost of Equity Capital written by Andreas Zweifel and published by GRIN Verlag. This book was released on 2017-03-07 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2012 in the subject Economics - Finance, grade: 5.5, University of Zurich (Department of Banking and Finance), course: Economics and Finance, language: English, abstract: Does voluntary disclosure quality pay off? And if so, what are the driving forces behind the relationship of voluntary disclosure quality and the cost of equity capital? This study addresses these and other questions in the context of analyzing the determinants of the cost of equity capital for Swiss firms. The relation between voluntary disclosure quality and cost of equity capital is widely known to be affected by self-selection. Potential endogeneity bias is controlled for by adopting a two-stage least squares approach in a cross-sectional setting. Voluntary disclosure quality is proxied by the annual reports disclosure scores for a well-diversified sample of Swiss firms as developed by the Department of Banking and Finance of the University of Zurich. Further, an ex-ante cost of capital metric derived from the dividend discount model is used in this study. Empirical evidence shows that the association between voluntary disclosure quality and cost of equity differs with a firm's stock listing history. While the relation is predicted to be negative for firms at the IPO stage, it is likely reversed at some point in a firm's stock listing history. These results suggest that analysts' information processing activities negatively moderate the impact of voluntary disclosure quality on firm value. Importantly, the predicted interaction between voluntary disclosure quality and stock listing history remains significant when adjusting for endogeneity.

Download or read book Do Higher Value Firms Voluntarily Disclose More Information Evidence from China written by Jean Jinghan Chen and published by . This book was released on 2013 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the effect of guanxi on the relation between firm value and voluntary disclosure of information about new investment projects in China's institutional setting. We find a negative relation between firm value and voluntary disclosure for firms that rely more heavily on guanxi in their value creation (e.g. non-high-tech firms, and firms located in regions with underdeveloped institutions). This type of firms refrains from detailed voluntary disclosures for fear of revealing sensitive information that may harm their guanxi. They may more incline to use guanxi to lower information asymmetry and the cost of capital. Therefore, they have less motivation of voluntary disclosure. By contrast, for firms that rely less heavily on guanxi and more on other sources of core competencies (e.g. high-tech firms, and firms in high-marketization regions), we find a positive relation between firm value and voluntary disclosure. This type of firms more replies on voluntary disclosure to reduce information asymmetry and financing cost. Such incentives are particularly strong for high value firms. The moderating role of guanxi on the relation between firm value and voluntary disclosure is explained by firms conscientiously balancing the costs and benefits of voluntary disclosure relative to guanxi. Our evidence has implications for research on motives for disclosure and regulation of financial reporting.

Download or read book Mandatory Disclosure and Asymmetry in Financial Reporting written by Jeremy Bertomeu and published by . This book was released on 2015 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article examines the demand for disclosure rules by informed managers interested in increasing the market price of their firms. Within a model of political influence, a majority of managers chooses disclosure rules with which all firms must comply. In equilibrium, disclosure rules are asymmetric with greater levels of disclosure over adverse events. This asymmetry is positively associated with the informativeness of the measurement and increasing in the level of verifiability and ex-ante uncertainty of the information. The theory also offers implications about the relationship between mandatory and voluntary disclosure, when both channels are endogenous.

Download or read book First Voluntary Disclosure written by Young-Soo Choi and published by . This book was released on 2016 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of voluntary disclosure regulation is to mitigate information asymmetry between the management and outside users. However, prior studies on voluntary disclosures provide mixed evidences on managers' incentives. Using a setting of voluntary non-GAAP EPS reporting, this study attempts to examine whether the first non-GAAP EPS reporting is less dominated by opportunistic incentives. Consistent with the predictions of this research, it reveals that the duration to the first adjusted EPS disclosure is not more sensitive to negative transitory items and moreover, investors' perception on the first non-GAAP EPS is more positive compared to subsequent ones. The less opportunistic behaviour on the first disclosure can be well explained by the management's awareness of intensified monitoring by outside stakeholders.