The joint effects of materiality thresholds and voluntary disclosure incentives on firms' disclosure decisions

Journal of Accounting and Economics

Volumn 49, Issue 1-2, 2010, Pages 109-132

  Heitzman, Shane ^a   Wasley, Charles ^a   Zimmerman, Jerold ^a  

^a UNIVERSITY OF ROCHESTER   (United States)

Author keywords

Advertising; Disclosure; Materiality; Partial observability model; Voluntary disclosure

Indexed keywords

EID: 73949086019     PISSN: 01654101     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jacceco.2009.10.002     Document Type: Article

References (99)

1. Abowd J., and Farber H. Job queues and the union status of workers. Industrial and Labor Relations Review 35 (1982) 354-367
2. Acito A., Burks J., and Johnson W. Materiality decisions and the correction of accounting errors. The Accounting Review 84 (2009) 659-688
3. Ajinkya B., Bhojraj S., and Sengupta P. The association between outside directors, institutional investors and the properties of management earnings forecasts. Journal of Accounting Research 43 (2005) 343-376
4. Baginski S., and Hassell J. Determinants of management forecast precision. The Accounting Review 72 (1997) 303-312
5. Baginski S., Hassell J., and Kimbrough M. Why do managers explain their earnings forecasts?. Journal of Accounting Research 42 (2004) 1-29
6. Baginski S., Hassell J., and Kimbrough M. Macro information environment change and the quality of management earnings forecasts. Review of Quantitative Finance and Accounting 31 (2008) 311-330
7. Bamber L., and Cheon Y. Discretionary management earnings forecast disclosures: antecedents and outcomes associated with forecast venue and forecast specificity choices. Journal of Accounting Research 36 (1998) 167-190
8. Barry C., and Brown S. Differential information and security market equilibrium. Journal of Financial and Quantitative Analysis 20 (1985) 407-422
9. Barry C., and Brown S. Limited information as a source of risk. The Journal of Portfolio Management 12 (1986) 66-72
10. Beatty A., and Weber J. Accounting discretion in fair value estimates: an examination of SFAS 142 goodwill impairments. Journal of Accounting and Economics 44 (2006) 257-288
11. Belsley D., Kuh E., and Welsch R. Regression Diagnostics: Identifying Influential Data and Sources of Collinearity (1980), John Wiley & Sons, Inc., New York
12. Berger P., and Hann R. The impact of SFAS No. 131 on information and monitoring. Journal of Accounting Research 41 (2003) 163-223
13. Berger P., and Hann R. Segment profitability and the proprietary and agency costs of disclosure. The Accounting Review 82 (2007) 869-906
14. Blumenthal, H., 2006. Securities Law Handbook, 2006 ed. (Thomson West).
15. Botosan C. Disclosure level and the cost of equity capital. The Accounting Review 72 (1997) 323-349
16. Botosan C., and Stanford-Harris M. Managers' motives to withhold segment disclosures and the effect of SFAS No. 131 on analysts' information environment. The Accounting Review 80 (2005) 751-771
17. Botosan C., and Plumlee M. A re-examination of disclosure level and the expected cost of equity capital. Journal of Accounting Research 40 (2002) 21-40
18. Brown S., and Hillegeist S. How disclosure quality affects the level of information asymmetry. Review of Accounting Studies 12 (2007) 443-477
19. Brown, S., Hillegeist, S., Lo, K., 2005. Management forecasts and litigation risk. Working Paper, Emory University.
20. Bushee B., and Noe C. Corporate disclosure practices, institutional investors, and stock return volatility. Journal of Accounting Research 38 supplement (2000) 171-202
21. Chen S., DeFond M., and Park C. Voluntary disclosure of balance sheet information in quarterly earnings announcements. Journal of Accounting and Economics 33 (2002) 229-251
22. Chewning E., Pany K., and Wheeler S. Auditor reporting decisions involving accounting principle changes: some evidence on materiality thresholds. Journal of Accounting Research 27 (1989) 78-96
23. Chewning E., Wheeler S., and Chan K. Evidence on auditor and investor materiality thresholds resulting from equity-for-debt swaps. Auditing: A Journal of Practice & Theory 17 (1998) 39-53
24. Clement M., Frankel R., and Miller J. Confirming management earnings forecasts, earnings uncertainty, and stock returns. Journal of Accounting Research 41 (2003) 653-679
25. Coller M., and Yohn T. Management forecasts and information asymmetry: an examination of bid-ask spreads. Journal of Accounting Research 35 (1997) 181-191
26. Collins D., and Kothari S.P. An analysis of the cross-sectional and intertemporal determinants of earnings response coefficients. Journal of Accounting and Economics 11 (1989) 143-181
27. Darrough M. Disclosure policy and competition: Cournot vs. Bertrand. The Accounting Review 68 (1993) 534-562
28. Darrough M., and Stoughton N. Financial disclosure policy in an entry game. Journal of Accounting and Economics 12 (1990) 219-244
29. Diamond D. Optimal release of information by firms. Journal of Finance (1985) 1071-1094
30. Diamond D., and Verrecchia R. Constraints on short-selling and asset price adjustment to private information. Journal of Financial Economics 18 (1987) 277-311
31. Diamond D., and Verrecchia R. Disclosure, liquidity, and the cost of capital. The Journal of Finance 46 (1991) 1325-1355
32. Dohr J. Materiality-what does it mean in accounting?. Journal of Accountancy July (1950) 54-56
33. Dye R. Strategic accounting choice and the effects of alternative financial reporting requirements. Journal of Accounting Research 23 (1985) 544-574
34. Dye R. Earnings management in an overlapping generations model. Journal of Accounting Research 26 (1988) 195-235
35. Dye R. Mandatory vs. voluntary disclosures: the cases of financial and real externalities. The Accounting Review 65 (1990) 1-24
36. Dye R. An evaluation of essays on disclosure and the disclosure literature in accounting. Journal of Accounting and Economics 32 (2001) 181-235
37. Dye R., and Verrecchia R. Discretion vs. uniformity: choices among GAAP. The Accounting Review 70 (1995) 389-415
38. Feltham G., and Xie J. Voluntary financial disclosure in an entry game with continua of type. Contemporary Accounting Research 9 (1992) 46-80
39. Field L., Lowry M., and Shu S. Does disclosure deter or trigger litigation. Journal of Accounting and Economics 39 (2005) 487-507
40. Fischer P., and Verrecchia R. Reporting bias. The Accounting Review 75 (2000) 229-245
41. Francis J., Philbrick D., and Schipper K. Shareholder litigation and corporate disclosures. Journal of Accounting Research 32 (1994) 137-164
42. Francis J., Khurana I., and Pereira R. Disclosure incentives and effects on cost of capital around the world. The Accounting Review 80 (2005) 1125-1162
43. Frankel R., McNichols M., and Wilson G. Discretionary disclosure and external financing. The Accounting Review 70 (1995) 135-150
44. Gigler F. Self-enforcing voluntary disclosures. Journal of Accounting Research 32 (1994) 224-241
45. Gigler F., and Hemmer T. On the frequency, quality, and informational role of mandatory financial reports. Journal of Accounting Research 36 Suppl. (1998) 117-147
46. Gigler F., and Hemmer T. Conservatism, optimal disclosure policy, and the timeliness of financial reports. The Accounting Review 76 (2001) 471-493
47. Gordon, S., 1933. Accountants and the Securities Act. Journal of Accountancy.
48. Gu F., and Li J. The credibility of voluntary disclosure and insider stock transactions. Journal of Accounting Research 45 (2007) 771-810
49. Greene, W., 2008. Econometric Analysis, Sixth ed. Prentice Hall, Upper Saddle River, New Jersey.
50. Hayes R., and Lundholm R. Segment reporting to the capital market in the presence of a competitor. Journal of Accounting Research 34 (1996) 261-280
51. Healy P., Hutton A., and Palepu K. Stock performance and intermediation changes surrounding sustained increases in disclosure. Contemporary Accounting Research 16 (1999) 485-520
52. Healy P., and Palepu K. Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. Journal of Accounting and Economics 31 (2001) 405-440
53. Hribar, P., Yang, H., 2006. CEO overconfidence, management earnings forecasts, and earnings management. Working Paper, University of Iowa.
54. Hutton A., Miller G., and Skinner D. The role of supplementary statements with management earnings forecasts. Journal of Accounting Research 41 (2003) 867-890
55. Hutton, A., Stocken, P., 2009. Effect of reputation on the credibility of management forecasts. Working Paper, Boston College.
56. Karamanou I., and Vafeas N. The association between corporate boards, audit committees, and management earnings forecasts. Journal of Accounting Research 43 (2005) 453-486
57. Kasznik R., and Lev B. To warn or not to warn: management disclosures in the face of an earnings surprise. The Accounting Review 70 (1995) 113-134
58. Kato K., Skinner D., and Kunimura M. Management forecasts in Japan: an empirical study of forecasts that are effectively mandated. Accounting Review 84 (2009) 1575-1606
59. Kim, J., Shi, Y., 2005. Voluntary disclosure and the cost of capital: evidence from management earnings forecasts. Working Paper, Concordia University.
60. Kim O., and Verrecchia R. The relation among disclosure, returns, and trading volume information. The Accounting Review 76 (2001) 633-654
61. Kinney W. Information Quality Assurance and Internal Control for Management Decision Making (2000), McGraw-Hill
62. Koch, A., 2003. Financial distress and the credibility of management earnings forecasts. Working Paper, Carnegie Mellon University.
63. Lambert R., Leuz C., and Verrecchia R. Accounting information, disclosure, and the cost of capital. Journal of Accounting Research 45 (2007) 385-420
64. Lang M., and Lundholm R. Cross-sectional determinants of analyst ratings of corporate disclosures. Journal of Accounting Research 31 (1993) 246-271
65. Lang M., and Lundholm R. Corporate disclosure policy and analyst behavior. The Accounting Review 71 (1996) 467-493
66. Lang M., and Lundholm R. Voluntary disclosure during equity offerings: reducing information asymmetry or hyping the stock. Contemporary Accounting Research 17 (2000) 623-663
67. Lennox C., and Park C. The informativeness of earnings and management's issuance of earnings forecasts. Journal of Accounting and Economics 42 (2006) 439-458
68. Leuz C., and Verrecchia R. The economic consequences of increased disclosure. Journal of Accounting Research 38 Supplement (2000) 91-136
69. Levi S. Voluntary disclosure of accruals in earnings press releases and the pricing of accruals. Review of Accounting Studies 13 (2008) 1-21
70. Li F. Annual report readability, current earnings, and earnings persistence. Journal of Accounting and Economics 45 (2008) 221-247
71. Loss L., and Seligman J. Securities Regulation. fifth ed. (2004), Aspen Publishers
72. Lys T., and Sabino J. Research design issues in grouping-based tests. Journal of Financial Economics 32 (1992) 355-387
73. McNichols M. Evidence of informational asymmetries from management earnings forecasts and stock returns. The Accounting Review 64 (1989) 1-27
74. Meng C., and Schmidt P. On the cost of partial observability in the bivariate probit model. International Economic Review 26 (1985) 71-85
75. Merton R. A simple model of capital market equilibrium with incomplete information. The Journal of Finance 42 (1987) 483-510
76. Miller G. Earnings performance and discretionary disclosure. Journal of Accounting Research 40 (2002) 173-204
77. Miller, G., Piotroski, J., 2000. The role of disclosure for high book-to-market firms. Working Paper, Harvard University.
78. Montgomery N., and Jennings A. Montgomery's Auditing (1949), The Ronald Press Company, New York
79. Nagar V., Nanda D., and Wysocki P. Discretionary disclosure and stock-based incentives. Journal of Accounting and Economics 34 (2003) 283-309
80. Narayanamoorthy, G., Cao, Z., 2005. The effect of litigation risk on management earnings forecasts. Working Paper, Yale University.
81. Newman P., and Sansing R. Disclosure policies with multiple users. Journal of Accounting Research 31 (1993) 92-113
82. Ng, J., Tuna, I., Verdi, R., 2007. Management forecasts, disclosure quality, and market efficiency. Working Paper, University of Pennsylvania.
83. Noe C. Voluntary disclosures and insider transactions. Journal of Accounting and Economics 27 (1999) 305-326
84. Pevzner, M., 2007. Management earnings forecasts, information asymmetry, and liquidity: an empirical investigation. Working Paper, George Mason University.
85. Poirier D. Partial observability in bivariate probit models. Journal of Econometrics 12 (1980) 209-217
86. Price R. Voluntary earnings disclosures in uniform franchise offering circulars. Journal of Accounting and Economics 28 (1999) 391-423
87. Rogers J., and Stocken P. The credibility of management forecasts. Accounting Review 80 (2005) 1233-1260
88. Rogers, J., Van Buskirk, A., 2006. Management forecasts bundled with negative earnings surprises: credibility-building versus opportunism. Working Paper, University of Chicago.
89. Sauer R. The erosion of the materiality standard in the enforcement of the federal securities laws. The Business Lawyer 62 (2007) 317-357
90. Sengupta P. Corporate disclosure quality and the cost of debt. The Accounting Review 73 (1998) 459-474
91. Skinner D. Why firms voluntarily disclose bad news. Journal of Accounting Research 32 (1994) 38-60
92. Skinner D. Earnings disclosures and stockholder lawsuits. Journal of Accounting and Economics 23 (1997) 249-282
93. Teets W., and Wasley C. Estimating earnings response coefficients: pooled versus firm-specific models. Journal of Accounting and Economics 21 (1996) 279-295
94. Trueman B. Why do managers voluntarily release earnings forecasts?. Journal of Accounting and Economics 8 (1986) 53-72
95. Verrecchia R. Discretionary disclosure. Journal of Accounting and Economics 5 (1983) 179-194
96. Verrecchia R. Essays on disclosure. Journal of Accounting and Economics 32 (2001) 97-180
97. Verrecchia R., and Weber J. Redacted disclosure. Journal of Accounting Research 44 (2006) 791-814
98. Wagenhofer A. Voluntary disclosure with a strategic opponent. Journal of Accounting and Economics 12 (1990) 341-364
99. Williams P. The relation between a prior earnings forecast by management and analyst response to a current management forecast. The Accounting Review 71 (1996) 103-113