No news is good news: voluntary disclosure in the face of litigation

Marinović, Ivan; Varas, Felipe

doi:10.1111/1756-2171.12156

Cited by 63 publications

(37 citation statements)

References 56 publications

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“…In contrast to this, there are arguments suggesting that the values within Mastery would motive managers to demonstrate a more compliant behavior hence resulting in higher levels of company disclosure compliance. First, consistent with the 'regulatory risk' argument advanced by Abdullah et al (2015), the litigation cost hypothesis (c.f., Skinner, 1994;1997) asserts that, in a capital markets setting, managers may incur reputational costs if they do not disclose bad news in a timely manner (and see Baginski et al, 2002;Karpoff, 2008;Marinovic and Varas, 2016). In support of this, Mayorga (2013Mayorga ( , p. 1150, based on interviews with managers responsible for companies' mandatory disclosures, reports that their disclosure decisions are positively influenced inter alia by 'perceived regulatory and litigation risks'.…”

Section: H2: Levels Of Compliance With Mandatory Goodwill Disclosuresmentioning

confidence: 99%

The effect of corruption and culture on mandatory disclosure compliance levels: Goodwill reporting in Europe

Mazzi

Slack

Tsalavoutas

2018

Journal of International Accounting, Auditing and Taxation

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Section: H2: Levels Of Compliance With Mandatory Goodwill Disclosuresmentioning

confidence: 99%

The effect of corruption and culture on mandatory disclosure compliance levels: Goodwill reporting in Europe

Mazzi

Slack

Tsalavoutas

2018

Journal of International Accounting, Auditing and Taxation

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“…The seller's strategic incentive can also be dynamic: one may refrain from disclosure even if he has favorable information at hand, as he fears that today's disclosure may make it harder to explain non--disclosure in the future when the information turns out non--favorable (Grubb 2011). In another example of dynamic incentives, a pharmaceutical firm may prefer to be silent about the potential health risks of its products because of litigation risk, but this may crowd out positive disclosures (Marinovic and Varas 2015).…”

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confidence: 99%

Is No News (Perceived as) Bad News? An Experimental Investigation of Information Disclosure

2015

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A central prediction of information economics is that market forces can lead businesses to voluntarily provide information about the quality of their products, yet little voluntary disclosure is observed in the field. In this paper, we demonstrate that the inconsistency between theory and reality is driven by a fundamental failure in consumer inferences when sellers withhold information. Using a series of laboratory experiments, we implement a simple disclosure game in which senders can verifiably report quality to receivers. We find that senders disclose less often than equilibrium would predict. Receivers are not sufficiently skeptical about undisclosed information -they underestimate the extent to which no news is bad news. Senders generally take advantage of receiver mistakes. We find that providing disclosure rates by quality score helps to improve receiver inferences.

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“…14 In real world settings, however, this might not always hold, especially when the information is difficult to verify (e.g., Rogers and Stocken 2005). Explicitly incorporating litigation risks or reputation costs into a model of voluntary disclosure in the presence of public information could be an interesting extension to this model (e.g., Marinovic and Varas 2016).…”

Section: Empirical Implications and Conclusionmentioning

confidence: 99%

Voluntary Disclosures When There Is an Option to Delay Disclosure

Menon

2020

Contemporary Accting Res

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What incentives drive managers to disclose immediately when they have an option to delay disclosures? I examine this question in a two‐period setting in which public news that is positively correlated with firm value arrives periodically. I show that, when the manager's likelihood of receiving information is independent of the public news, an informed manager is more likely to disclose immediately when the public news is good. This happens even as the disclosure threshold itself increases in the public news. My model provides a potential explanation for why managers have a higher propensity to provide earnings forecasts when current earnings are high. I also show that, even when disclosures are credible, the average price reaction to a voluntary disclosure is (i) decreasing in the magnitude of the public news and (ii) lower when the manager is more myopic. These results have potential implications for studies that use stock returns to measure the news contained in management disclosures.

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No news is good news: voluntary disclosure in the face of litigation

Cited by 63 publications

References 56 publications

The effect of corruption and culture on mandatory disclosure compliance levels: Goodwill reporting in Europe

The effect of corruption and culture on mandatory disclosure compliance levels: Goodwill reporting in Europe

Is No News (Perceived as) Bad News? An Experimental Investigation of Information Disclosure

Voluntary Disclosures When There Is an Option to Delay Disclosure

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