An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Xinghua Liang
University of Toronto

Abstract: This paper examines empirically the relation between voluntary disclosures and investors search costs, and the concomitant effect of disclosure on funds flow. By examining a sample of retail S&P 500 index funds, I show that mutual funds provide more information when investors search costs are high, after controlling for their demand for information. The costs and benefits associated with mutual fund managers’ voluntary disclosure decisions are also examined endogenously. I find that funds disclose more when the funds inflow is relatively low. The results emphasize the role of search costs in investors’ information acquisition, which was not previously documented in the empirical disclosure literature.

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