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Mandatory and Voluntary Disclosures: Dynamic Interactions

Author

Listed:
  • Davide Cianciaruso

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Swaminathan Sridharan

    (Northwestern University [Evanston])

Abstract

Firms sometimes obtain soft private information about growth prospects along with hard information about current or past performance. In this environment, we find that optimizing disclosures over multiple periods yields nonlinear stock price reactions following both voluntary and mandatory disclosures. Further, we derive several predictions about distinct short-run and long-run effects of disclosures and nondisclosures on security prices. Under specified conditions, when the volatility of the firm's earnings increases, the average contemporaneous and prospective post-mandatory disclosure market premia (for voluntary disclosures over nondisclosures) rise, while farther-in-future market discounts (for such voluntary disclosures) also become larger. Our analysis moreover predicts that both the disclosure probability and the information content of nondisclosures can increase in the persistence of earnings.

Suggested Citation

  • Davide Cianciaruso & Swaminathan Sridharan, 2018. "Mandatory and Voluntary Disclosures: Dynamic Interactions," Working Papers hal-01933869, HAL.
    • Handle: RePEc:hal:wpaper:hal-01933869
    DOI: 10.2139/ssrn.3153799
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    Citations

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    Cited by:

    1. Nathan Zhenghang Zhu & Kun Tracy Wang & Mark Wilson, 2022. "The Effect of Conditional Management Earnings Forecast Mandates on Voluntary Disclosure and Analyst Forecast Properties," Abacus, Accounting Foundation, University of Sydney, vol. 58(3), pages 479-522, September.
    2. Pierre Chaigneau & Nicolas Sahuguet, 2023. "The Complementarity Between Signal Informativeness and Monitoring," Journal of Accounting Research, Wiley Blackwell, vol. 61(1), pages 141-185, March.
    3. Henry L. Friedman & John S. Hughes & Beatrice Michaeli, 2022. "A Rationale for Imperfect Reporting Standards," Management Science, INFORMS, vol. 68(3), pages 2028-2046, March.
    4. Friedman, Henry L. & Hughes, John S. & Michaeli, Beatrice, 2020. "Optimal reporting when additional information might arrive," Journal of Accounting and Economics, Elsevier, vol. 69(2).
    5. Anne Beyer & Ronald A. Dye, 2023. "On the Disclosure of Half-Truths and the Duty to Update," Management Science, INFORMS, vol. 69(7), pages 4283-4311, July.

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