The Effects of Voluntary Disclosure, Managerial Ownership, and Proprietary Cost on the Return-Earnings Relationship: Singapore Evidence

Luo Shuqing
Nanyang Technological University

Mahmud Hossain
Nanyang Technological University

Stephen M Courtney
Nanyang Technological University

Abstract: This study examines how voluntary disclosure affects the relationship between current annual return, contemporaneous annual earnings and future earnings, and how block ownership (inside and outside), proprietary cost and government ownership affect this relationship. Regression analyses reveal that firms with relatively higher voluntary disclosure levels bring more information about future performance forward in the current stock return. However, this positive association is weaker when management holds a higher proportion of share ownership in the company when there is proprietary cost and the presence of government ownership. Our results remain significant after controlling for the usual factors in the simple return-earnings regression. The results suggest that voluntary disclosure reveals relevant information about future earnings, and that this information is impounded into the current stock price. Insider ownership concentration, proprietary cost, and government ownership reduce the incentives to provide higher levels of voluntary disclosure to investors.

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