Ownership, Competition, and Financial Disclosure

Abstract

Empirical research on firms' (dis)incentives to disclose investigates the effects of a range of variables including information asymmetry, agency costs, political costs, and proprietary costs. Verrecchia (2001) argues that economic-based models of disclosure must establish a link between financial reporting and its economic consequences. In response to Verrecchia (2001) and drawing on the industrial organization and strategic management disciplines we introduce a new variable (measuring insider ownership and industry competition) which links both the internal and external environments of the firm and demonstrate that it adds to our understanding of discretionary financial disclosure decisions. We test the model by examining voluntary segment disclosures in Australian firms. We find that our new variable linking the internal and external environment of the firm, alongside previously tested variables including ownership diffusion, return and size is significant. We conduct a series of robustness tests on our model and find that the significance of the model is robust to the inclusion of variables measuring the change in standard, acquisitions and disposals and cross listing on the US stock exchange.

Risk‐related disclosures by non‐finance companies

“…But most managers prefer go beyond mandatory requirements and disclose risk information on a voluntary basis (Papa, 2007;Linsley and Shrives, 2005;Lajili and Zéghal, 2005;Beretta and Bozzolan, 2004;Carlon et al, 2003, Shrives andLinsley, 2003). The reasons to do so is quite complex and a number of theories have been developed to explain it, such as, agency theory (Jensen and Meckling, 1976), the signalling theory (Ross, 1977;Morris, 1987), the neo-institutional theory (Olivier, 1991;Fernández-Alles and Valle-Cabrera, 2006), the legitimacy theory (Shocker and Sethi, 1974), the stakeholder theory (Freeman, 6 1984), the political costs theory (Watts and Zimmerman, 1986;Birt et al, 2006) and the attribution theory (Bettman and Weitz, 1983;Staw et al, 1983, Salancik andMeidl, 1984;Clapham and Schwek, 1991).…”

Property, Plant and Equipment disclosure requirements and firm characteristics: the Portuguese Accounting Standardization System

“…The reasons behind a certain disclosure behavior are complex and a number of theories have been developed to explain it, such as, the agency theory (Jensen & Meckling, 1976), the signalling theory (Ross, 1977;Morris, 1987), the neo-institutional theory (Olivier, 1991; Fernández-Alles & Valle-Cabrera, 2006), the legitimacy theory (Shocker & Sethi, 1974), the stakeholder theory (Freeman, 1984), and the political costs theory (Watts & Zimmerman, 1986;Birt et al, 2006).…”

“…The political costs theory explains that, to mitigate potential political costs which are politically visible, companies increase their disclosures, in order to manipulate their image and divert the attention of others (Birt et al, 2006;Watts and Zimmerman, 1986).…”

News Media Coverage of Corporate Tax Avoidance and Corporate Tax Reporting

“…The data are provided by ActionAid (2013) Previous studies identify several determinants that influence the level and quality of corporate disclosure. The effects of the following factors are generally discussed and, accordingly, they are included as control variables: Firm size (Size) (Firth, 1979;Lang and Lundholm, 1993), ownership concentration (Ownership) (LaPorta et al, 1998;Birt et al, 2006), and age (Age) (Roberts, 1992). Firm size is measured as the logarithm of total sales.…”