The Trade-Off Between Mandatory and Voluntary Disclosure: Evidence From Oil Companies’ Risk Reporting

2021 ◽  
pp. 0148558X2110252
Author(s):  
Claudia Arena ◽  
Saverio Bozzolan ◽  
Claudia Imperatore
Keyword(s):  
Voluntary Disclosure ◽  
Empirical Studies ◽  
Jel Classification ◽  
Risk Disclosure ◽  
Voluntary Disclosures ◽  
Firm Level ◽  
High Exposure ◽  
Trade Off ◽  
Oil Companies ◽  
Risk Reporting

Theoretical propositions suggest that mandatory and voluntary disclosures are related. Empirical studies focusing on this relationship provide mixed evidence as they found that mandatory and voluntary disclosures are either complements or substitutes. Relying on a proprietary, hand-collected database about the risk disclosure of oil companies, we find that voluntary risk disclosure increases with the level of mandatory risk disclosure up to a threshold above which companies reduce their voluntary disclosures. We also find that this relationship depends on the firm-level uncertainty, and it is sharpened in the presence of high exposure to liquidity risk. Overall, our results contribute to the debate on whether and on which level disclosure should be regulated. JEL Classification: M41, G14

Risk Disclosures in the Annual Reports of Italian Listed Companies

2014 ◽  
pp. 141-168
Author(s):  
Lorenzo Neri ◽  
Antonella Russo
Keyword(s):  
Voluntary Disclosure ◽  
Stock Exchange ◽  
Empirical Work ◽  
Annual Reports ◽  
Risk Disclosure ◽  
Listed Firms ◽  
Risk Disclosures ◽  
The Relationship ◽  
Increases In Risk ◽  
Risk Reporting

The study examines the relevance of risk reporting in the field of firm voluntary disclosure with an empirical work on Italian listed firms. The motivation of this study is the implementation of the Directive 51/2003/CE in Italy (D.Lgs. 32/2007), a sample of companies listed on the Italian Stock Exchange is selected to investigate the relationship between risk disclosure and company characteristics. This paper explores whether there are significant increases in risk reporting over a period of five years and investigates if risk disclosure is influenced only by new law requirement or also by other possible drivers. A content analysis is performed to obtain a measure of risk narrative disclosure. Then several hypothesis tests are carried out to verify whether there are any corporate differences between companies with different levels of risk disclosure, using univariate and multivariate analysis. Our results on the first question document significant increases in Italian companies' levels of risk disclosures. We find also that the disclosure is not only determined by the new law requirements but also by other drivers such as company size.

Societal Trust and Management Earnings Forecasts

2020 ◽  
Vol 95 (5) ◽  
pp. 149-184 ◽  
Author(s):  
Yuyan Guan ◽  
Gerald J. Lobo ◽  
Albert Tsang ◽  
Xiangang Xin
Keyword(s):  
Voluntary Disclosure ◽  
Earnings Forecasts ◽  
Earnings Forecast ◽  
Management Earnings Forecasts ◽  
Voluntary Disclosures ◽  
Firm Level ◽  
Country Level ◽  
Management Earnings Forecast ◽  
Credible Information ◽  
The Relationship

ABSTRACT We investigate the relationship between societal trust and managers' decisions to voluntarily issue earnings forecasts. We reason that managers are more likely to issue earnings forecasts in high-trust countries than in low-trust countries because investors view these voluntary disclosures as more credible information about the firm's future profitability. We find evidence consistent with these predictions, suggesting that societal trust fosters corporate voluntary disclosure. We also document that societal trust works as a substitute for country-level formal institutions in terms of its implications for management earnings forecast (MEF) issuance. Additionally, we find a stronger relationship between firm-level commitment to credible disclosure and MEFs in low-trust countries, suggesting that country-level societal trust relates to the effectiveness of firm-level credibility-enhancing mechanisms. Finally, we show that firms from countries with higher societal trust issue more precise and accurate MEFs that contain more information about multiple items.

Discretionary Risk Disclosures

2003 ◽  
Vol 78 (2) ◽  
pp. 449-469 ◽  
Author(s):  
Bjorn N. Jorgensen ◽  
Michael T. Kirschenheiter
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Voluntary Disclosure ◽  
Cash Flows ◽  
Share Price ◽  
Risk Disclosure ◽  
Share Prices ◽  
Ex Post ◽  
Partial Disclosure ◽  
Future Cash Flows

We model managers' equilibrium strategies for voluntarily disclosing information about their firm's risk. We consider a multifirm setting in which the variance of each firm's future cash flow is uncertain. A manager can disclose, at a cost, this variance before offering the firm for sale in a competitive stock market with risk-averse investors. In our partial disclosure equilibrium, managers voluntarily disclose if their firm has a low variance of future cash flows, but withhold the information if their firm has highly variable future cash flows. We establish how the manager's discretionary risk disclosure affects the firm's share price, expected stock returns, and beta, within the framework of the Capital Asset Pricing Model. We show that whereas one manager's discretionary disclosure of his firm's risk does not affect other firms' share prices, it does affect the other firms' betas. Also, we demonstrate that a disclosing firm has lower risk premium and beta ex post than a nondisclosing firm. Finally, we show that ex ante, the expected risk premium and expected beta of each firm are higher under a mandatory risk disclosure regime than in the partial disclosure equilibrium that arises under a voluntary disclosure regime.

scholarly journals Does graphical reporting improve risk disclosure? Evidence from European banks

2018 ◽  
Vol 19 (1) ◽  
pp. 161-180 ◽  
Author(s):  
Michael Jones ◽  
Andrea Melis ◽  
Silvia Gaia ◽  
Simone Aresu
Keyword(s):  
Credit Risk ◽  
Impression Management ◽  
Perspective Taking ◽  
Voluntary Disclosure ◽  
Cognitive Biases ◽  
Annual Reports ◽  
Theory Approach ◽  
Risk Disclosure ◽  
Content Type ◽  
Incremental Information

Purpose The purpose of this paper is to examine the voluntary disclosure of risk-related issues, with a focus on credit risk, in graphical reporting for listed banks in the major European economies. It aims to understand if banks portray credit risk-related information in graphs accurately and whether these graphs provide incremental, rather than replicative, information. It also investigates whether credit risk-related graphs provide a fair representation of risk performance or a more favourable impression than is warranted. Design/methodology/approach A graphical accuracy index was constructed. Incremental information was measured. A multi-level linear model investigated whether credit risk affects the quantity and quality of graphical credit risk disclosure. Findings Banks used credit risk graphs to provide incremental information. They were also selective, with riskier banks less likely to use risk graphs. Banks were accurate in their graphical reporting, particularly those with high levels of credit risk. These findings can be explained within an impression management perspective taking human cognitive biases into account. Preparers of risk graphs seem to prefer selective omission over obfuscation via inaccuracy. This probably reflects the fact that individuals, and by implication annual report’s users, generally judge the provision of inaccurate information more harshly than the omission of unfavourable information. Research limitations/implications This study provides theoretical insights by pointing out the limitations of a purely economics-based agency theory approach to impression management. Practical implications The study suggests annual reports’ readers need to be careful about subtle forms of impression management, such as those exploiting their cognitive bias. Regulatory and professional bodies should develop guidelines to ensure neutral and comparable graphical disclosure. Originality/value This study provides a substantive alternative to the predominant economic perspective on impression management in corporate reporting, by incorporating a psychological perspective taking human cognitive biases into account.

Does board gender diversity affect the transparency of corporate political disclosure?

2018 ◽  
Vol 26 (4) ◽  
pp. 444-463 ◽  
Author(s):  
D.G. DeBoskey ◽  
Yan Luo ◽  
Jeff Wang
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Gender Diversity ◽  
Political Activity ◽  
Political Contributions ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
Ethics Research ◽  
Board Gender Diversity

Purpose The purpose of this paper is to examine the influence of board gender diversity on the transparency of corporate political disclosure (CPD). Design/methodology/approach Two empirical proxies, CPD transparency and policy transparency, are constructed from a data set jointly produced by the Center of Political Activity and the Carol and Lawrence Zicklin Center for Business Ethics Research. The CPD transparency score measures the level of transparency in voluntary corporate disclosure of the amount of political contributions and the identity of the recipients as well as the titles and names of the executives who authorize the political spending. The policy transparency score measures the level of transparency in the voluntary disclosure of the policies governing corporate political spending. Board gender diversity is measured by the percentage of women on the board of directors. Findings Higher proportions of female directors are associated with more transparent disclosure of political contributions after controlling for a set of corporate governance and firm-level variables. Originality/value This study is the first to examine whether and how gender-diversified boards enhance the transparency of CPD. It contributes to the literature by providing evidence that gender-diversified boards enhance corporate governance.

DECONSTRUCTING LAWSON AND SAMSON’S CONCEPT OF INNOVATION CAPABILITY: A CRITICAL ASSESSMENT AND A REFINEMENT

2019 ◽  
Vol 23 (06) ◽  
pp. 1950053 ◽  
Author(s):  
ARMAND DJOUMESSI ◽  
SHU-LING CHEN ◽  
STEPHEN CAHOON
Keyword(s):  
Factor Analysis ◽  
Dynamic Capabilities ◽  
Innovation Management ◽  
Empirical Studies ◽  
Capabilities Approach ◽  
Three Dimensions ◽  
Innovation Capability ◽  
Maritime Industry ◽  
Firm Level ◽  
Confirmatory Factor

For almost 20 years, research on firm level innovation have relied upon [Lawson and Samson (2001). Developing innovation capability in organisations: A dynamic capabilities approach. International Journal of Innovation Management, 5(3), 377–400] concept of innovation capability (IC). Of note, these authors stated that this concept needs to be ‘refined, validated and tested using other research methods’ [Lawson and Samson (2001). Developing innovation capability in organisations: A dynamic capabilities approach. International Journal of Innovation Management, 5(3), 377–400], p. 396. To date, empirical studies heeding this call have been challenging to find. By researchers relying on this untested concept, they risk not attaining comprehensive insights into the firm level mechanisms underpinning the transformation idea and knowledge into innovations. This paper proposes a rethinking of the IC concept. The analysis is based on survey data of 69 firms involved in the Australian maritime industry using exploratory factor analysis (EFA) and confirmatory factor analysis (CFA). The results suggest that the IC concept might be refined from seven dimensions, initially conceptualised, to three dimensions. The three dimensions are renamed as institutionalising innovation, implementing innovation and stimulating innovation.

Total Effects of Privatization: Evidence from Turkey

2018 ◽  
Vol 50 (4) ◽  
pp. 699-707
Author(s):  
Doruk Cengiz
Keyword(s):  
Jel Classification ◽  
Profit Margin ◽  
Income Transfer ◽  
Firm Level ◽  
Privatization Process ◽  
Direct Outcome ◽  
Wage Earners

I examine effects of the privatization process as a whole in Turkey. I show that the privatization process begins before the firm is sold to private agents. I find that privatization causes the firm-level workforce to decline by 65 percent, profit-margin to increase by 18 percent, and no substantial changes in real sales. Based on the evidence presented, I conclude that the direct outcome of privatization is an income transfer from wage earners to profit earners. JEL Classification: L33, H42

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