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Does Voluntary Non-earnings Disclosure Substitute for Redacted Proprietary Contract Information?

Author

Listed:
  • Barth, Mary E.

    (Stanford U)

  • Landsman, Wayne R.

    (U of North Carolina at Chapel Hill)

  • Tian, Xiaoli (Shaolee)

    (Georgetown U)

  • Yu, Miaomiao

    (Louisiana State U)

Abstract

This study finds that voluntary non-earnings disclosures substitute for redacted proprietary contract information. When firms redact contract information, they provide more voluntary disclosures and have higher information uncertainty and asymmetry. Although firms provide both voluntary non-earnings and earnings disclosures when they redact contract information, only non-earnings disclosures in Forms 8-K mitigate the higher information uncertainty and asymmetry associated with redaction. These findings suggest earnings disclosures may not be specific enough to substitute for redacted contract information and contrast with the presumption in related research that firms provide earnings disclosures to substitute for withheld proprietary information. Our inferences particularly apply to research and development and license contracts, which are more likely to contain proprietary information that also is relevant to investors. Taken together, our study's evidence can be informative to the SEC in its consideration of the effects of reducing mandatory disclosure on information available to investors.

Suggested Citation

  • Barth, Mary E. & Landsman, Wayne R. & Tian, Xiaoli (Shaolee) & Yu, Miaomiao, 2022. "Does Voluntary Non-earnings Disclosure Substitute for Redacted Proprietary Contract Information?," Research Papers 4056, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:4056
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    File URL: https://www.gsb.stanford.edu/faculty-research/working-papers/does-voluntary-non-earnings-disclosure-substitute-redacted
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    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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