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A Rationale for Imperfect Reporting Standards

The aim of general purpose financial reporting is to provide information that is useful to investors, lenders, and other creditors. With this goal, regulators have tended to mandate increased disclosure. We show that increased mandatory disclosure can weaken a firm’s incentive to acquire and voluntarily disclose private information that is not amenable to inclusion in mandated reports. Specifically, we provide conditions under which a regulator, seeking to maximize the total amount of information provided to investors via both mandatory and voluntary disclosures, would mandate less informative and more conservative financial reports even in the absence of any direct costs of increasing informativeness. This result is robust to allowing the firm to make reports more informative and to imposing a nondisclosure cost or penalty on the firm. The results and comparative statics analysis contribute to our understanding of interactions between mandatory reporting and voluntary disclosure and demonstrate a novel benefit to setting accounting standards that mandate imperfectly informative reports.

Ketersediaan

Informasi Detail

Judul Seri

MANAGEMENT SCIENCE; Vol.68 No.3 March 2022

No. Panggil

-

Penerbit

: .,

Deskripsi Fisik

p. 2028-2046

Bahasa

English

ISBN/ISSN

-

Klasifikasi

NONE

Tipe Isi

-

Tipe Media

-

Tipe Pembawa

-

Edisi

-

Subjek

FINANCIAL REPORTING
DISCLOSURE
INFORMATION GATHERING
REPORTING STANDARDS

Info Detail Spesifik

https://doi.org/10.1287/mnsc.2021.3965

Pernyataan Tanggungjawab

Henry L. Friedman, John S. Hughes, Beatrice Michaeli

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