Voluntary Disclosures and Information Production By Analysts

Langberg, Nisan; Sivaramakrishnan, Shiva

doi:10.2139/ssrn.909549

Cited by 13 publications

(14 citation statements)

References 32 publications

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“…Lastly, this stream of research can also be of interest to researchers who examine the antecedents and/or consequences of the provision in organizations of more (or less precise) information in continuous settings [finer (coarser) information in discrete settings]. For example, in accounting an important literature on the link between precision of information and properties of disclosure has developed (see Verrecchia 1990, Dye and Sridhar 2007, Langberg and Sivaramakrishnan 2008. Empirical testing of these hypotheses requires that we understand how information fineness/preciseness might translate into properties of observable data, such as the properties of costing systems studied here.…”

Section: Discussionmentioning

confidence: 99%

Evaluating Heuristics Used When Designing Product Costing Systems

2011

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The academic and practitioner literature justifies firms' use of product costs in product pricing and capacity planning decisions as heuristics to address an otherwise intractable problem. However, product costs are the output of a cost reporting system, which itself is the outcome of heuristic design choices. In particular, because of informational limitations, when designing cost systems firms use simple rules of thumb to group resources into cost pools and to select drivers used to allocate the pooled costs to products. Using simulations, we examine how popular choices in costing system design influence the error in reported costs. Taking information needs into account, we offer alternative ways to translate the vague guidance in the literature to implementable methods. Specifically, we compare size-based rules for forming cost pools with more informationally demanding correlation-based rules and develop a blended method that performs well in terms of accuracy. In addition, our analysis suggests that significant gains can be made from using a composite driver rather than selecting a driver based on the consumption pattern for the largest resource only, especially when combined with correlation-based rules to group resources. We vary properties of the underlying cost structure (such as the skewness in resource costs, the traceability of resources to products, the sharing of resources across products, and the variance in resource consumption patterns) to address the generalizability of our findings and to show when different heuristics might be preferred. This paper was accepted by Stefan Reichelstein, accounting.costing, estimation, activity-based costing, cost drivers, cost pools

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Section: Discussionmentioning

confidence: 99%

Evaluating Heuristics Used When Designing Product Costing Systems

2011

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“…() study the effect of voluntary disclosures on future investment decisions, finding that a manager concerned with his firm's future discloses extremely good or bad investment prospects in order to guide efficient resource allocations down the road. Voluntary disclosures can also impact analysts' feedback, which then play a part in guiding managers' subsequent decisions (e.g., Langberg and Sivaramakrishnan ). In a complementary fashion, by focusing on the manager's information acquisition, we establish that the effects of voluntary disclosure on managerial decisions start early, even prior to the realization of private information.…”

Section: Introductionmentioning

confidence: 99%

Quality Testing and Product Rationing by Input Suppliers

Arya

Gong

Ramanan

2014

Production and Operations Management

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Q uality testing by suppliers has significant ramifications for downstream supply chain participants and retail consumers. This article focuses on such implications accounting for the fact that suppliers often enjoy discretion in quality testing and reporting. Under a discretionary testing and reporting environment, we show that a supplier can improve the market's perception of product quality by engaging in self-imposed production cuts. Production cuts dampen supplier incentives to engage in excessive quality testing, putting the supplier and the market on a more equal information footing. This reduces the market's need to skeptically discount product quality to protect itself. The improved market perception, then, reduces quality testing demand, introducing cost savings. The result that costly production cuts can improve quality perceptions indicates that the groundwork for influencing market perceptions may have to be laid upfront, even prior to acquiring private information, providing a contrast to routine signaling models.

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“…For instance, as in Langberg and Sivaramakrishnan (2008), we could assume that π = h • s represents a situation in which a single asset generates cash flows h ∈ R + only if an event whose unknown probability s ∈ [0, 1] occurs. Here, h could be the nominal/face value of the asset, and 1 − s the probability that the asset defaults.…”

Section: Interactions Between Verifiable and Unverifiable Informationmentioning

confidence: 99%

A Theory of Hard and Soft Information

Bertomeu

Marinović

2015

The Accounting Review

120

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We study optimal disclosure via two competing communication channels: hard information whose value has been verified, and soft disclosures such as forecasts, unaudited statements, and press releases. We show that certain soft disclosures may contain as much information as hard disclosures, and we establish that: (1) exclusive reliance on soft disclosures tends to convey bad news, (2) credibility is greater when unfavorable information is reported, and (3) misreporting is more likely when soft information is issued jointly with hard information. We also show that a soft report that is seemingly unbiased in expectation need not indicate truthful reporting. We demonstrate that mandatory disclosure of hard information reduces the transmission of soft information, and that the aggregation of hard with soft information will turn all information soft. JEL Classifications: D72; D82; D83; G20.

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Voluntary Disclosures and Information Production By Analysts

Cited by 13 publications

References 32 publications

Evaluating Heuristics Used When Designing Product Costing Systems

Evaluating Heuristics Used When Designing Product Costing Systems

Quality Testing and Product Rationing by Input Suppliers

A Theory of Hard and Soft Information

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