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Inter-temporal Dynamics of Corporate Voluntary Disclosures
Eti Einhorn, Tel Aviv University
Amir Ziv, Columbia University
ABSTRACT. In this paper, we demonstrate that a firm’s disclosure strategy is not time isolated, but is rather an integral part of the firm’s past and future strategic disclosure behavior. Our analysis suggests that, by augmenting the market’s awareness of the existence of information, voluntary disclosure generates an implicit commitment to provide similar disclosures in the future. This implicit commitment is the source of a variety of indirect disclosure costs that reduce managerial propensity to provide voluntary disclosures to the capital market. The suppressing impact of inter-temporal forces on the likelihood of disclosure occurrence appears to be more salient for firms with a longer history of avoiding disclosures and better past operating performance. It is also likely to be positively related to the level of stability in the business and information environment and to managerial time horizon and degree of risk aversion.
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