scholarly journals Goodwill impairment test disclosures under IAS 36: Compliance and disclosure quality, disclosure determinants, and the role of enforcement

2019 ◽  
Vol 16 (1-1) ◽  
pp. 145-167
Author(s):  
Marius Gros ◽  
Sebastian Koch
Keyword(s):  
Voluntary Disclosure ◽  
Strategic Behavior ◽  
Disclosure Quality ◽  
Goodwill Impairment ◽  
Disclosure Requirements ◽  
Quality Disclosure ◽  
Low Levels ◽  
The Cost ◽  
Proprietary Cost

Prior research documented that higher disclosure quality reduces information asymmetry and the cost of capital. Accordingly, firms have an incentive to comply with disclosure requirements and to provide voluntary disclosure. However, prior research on mandatory disclosures on goodwill impairment testing reveals low compliance among European firms. In this paper, we contribute to the literature and assist regulators, enforcers, and standard setters by shedding light on the determinants of the observed low levels of compliance and voluntary disclosure. Consistent with economic theory, we reveal that firms determine the level of disclosure strategically. We find firms with higher preparation and proprietary cost to show lower compliance and less voluntary disclosure while firms with higher growth opportunities provide better compliance and more voluntary disclosure. However, the strategic behavior is constrained by enforcement. Consequently, our results are more (less) pronounced within a weak (strong) enforcement environment.

scholarly journals Do Innovative Firms Communicate More? Evidence from the Relation between Patenting and Management Guidance

2020 ◽  
pp. 0000-0000
Author(s):  
Sterling Huang ◽  
Jeffrey Ng ◽  
Tharindra Ranasinghe ◽  
Mingyue Zhang
Keyword(s):  
Voluntary Disclosure ◽  
Regulation Fair Disclosure ◽  
Fair Disclosure ◽  
Information Demand ◽  
Disclosure Decisions ◽  
Management Guidance ◽  
Proprietary Cost ◽  
Role Of Information ◽  
Innovation Outcomes

Successful innovations could induce more disclosure if the information asymmetry between the firm and its investors about post-innovation outcomes leads investors to demand more information. However, such innovations also likely entail greater proprietary cost concerns, which deter disclosure. This paper uses patent grants to examine the effect of innovation success on management guidance behavior. We find that more management guidance follows patent grants, suggesting that despite disclosure cost concerns, firms with successful innovations do respond to information demand. This association is stronger after enactment of Regulation Fair Disclosure and for firms with greater institutional investor ownership, further highlighting the role of information demand. The association is weaker for firms with more competition, consistent with proprietary cost concerns having a moderating impact. Overall, our findings suggest that innovation creates demand for more voluntary disclosure and firms' disclosure decisions following innovation outcomes vary in ways that disclosure theory and economic intuition predict.

On Market Concentration and Disclosure

2021 ◽  
Author(s):  
Edwige Cheynel ◽  
Amir Ziv
Keyword(s):  
Voluntary Disclosure ◽  
Production Costs ◽  
Reduced Form ◽  
Proprietary Costs ◽  
Cournot Game ◽  
Form Representation ◽  
Partial Disclosure ◽  
The Cost ◽  
Proprietary Cost ◽  
Managerial Horizon

Verrecchia (1983,1990) introduced the proprietary cost hypothesis in which exogenous disclosure costs are a reduced-form interpretation of lost competitive advantage in product markets. We develop a micro-foundation for this disclosure cost in a Cournot game and explicitly derive the cost as a function of market structure. When the market is sufficiently competitive, this model has a reduced-form representation similar to a standard voluntary disclosure game with a partial disclosure equilibrium. Proprietary costs are increasing in the number of competitors, the degree of product substitution, overall uncertainty and production costs. The analysis also offers new empirical predictions on the interaction between disclosure choice, managerial horizon and entry.

Disclosure Quality of Goodwill Impairment Testing: A Disclosure Index

2012 ◽  
pp. 5-30 ◽  
Author(s):  
Khairil Faizal Khairi ◽  
Nur Hidayah Laili ◽  
Dung Manh Tran
Keyword(s):  
Annual Reports ◽  
Mandatory Disclosure ◽  
Disclosure Quality ◽  
Quality Of Information ◽  
Listed Firms ◽  
Goodwill Impairment ◽  
Weighted Index ◽  
Disclosure Requirements ◽  
Compliance Level

This study sets out to offer proof of several important questions relating to the quality of information disclosed on goodwill impairment process under the new requirements of FRS 36. This study investigates the compliance level and disclosure quality of FRS 36 by top 20 of Singaporean listed firms in SGX at 2007 based on their market capitalization. In order to achieve the objective of this study, the weight- ed index is chosen because this index is able to differentiate the quality and impor- tance of each mandatory disclosure under FRS 36. The weighted index was developed by constructing a disclosure scoring sheet, obtaining annual reports of 20 sampled Singapore firms for particular year, complet- ing scoring sheet for each firms by assigned weighted for the disclosure items and calculating disclosure weighted index. The weighted index was analyzed to examine the firm’s compliance with the FRS 36 disclosure requirements. The results of this study revealed that 18 out of 20 (90%) firms in Singapore failed to comply with the most basic elements of the FRS 36 pertaining to goodwill impairment testing espe- cially in allocating goodwill into the CGUs and key assumptions used in determin- ing the recoverable amount of CGU assets.

Firm and Investor Responses to Uncertain Tax Benefit Disclosure Requirements

2013 ◽  
Vol 35 (2) ◽  
pp. 85-120 ◽  
Author(s):  
Leslie A. Robinson ◽  
Andrew P. Schmidt
Keyword(s):  
Small Firms ◽  
Negative Association ◽  
Objective Measures ◽  
Disclosure Quality ◽  
Full Disclosure ◽  
Fin 48 ◽  
Proprietary Costs ◽  
Disclosure Requirements ◽  
Proprietary Cost ◽  
Jel Classifications

ABSTRACT We examine whether proprietary costs affect disclosure quality and how investors react to disclosure quality in a new proprietary cost setting. We apply Verrecchia's (1983) proprietary cost theory to the FIN 48 adoption setting and argue that proprietary costs result from beliefs that the new disclosures could weaken a firm's competitive position when negotiating with tax authorities. FIN 48 is an ideal setting to examine how proprietary costs affect disclosure given the proprietary nature of uncertain tax positions, and the ability to construct objective measures of both proprietary costs and disclosure quality. We construct disclosure quality scores for S&P 1500 firms and offer two empirical findings. First, we find a negative association between proprietary costs and disclosure quality. Second, investors reward firms for low disclosure quality, especially small firms and firms with high proprietary costs. Both findings are consistent with Verrecchia's (1983) theory, and suggest that proprietary costs moderate investor demand for full disclosure. JEL Classifications: G14, L15, M41, M44, M45

scholarly journals Determinants of compliance with mandatory disclosure: Research evidence

2018 ◽  
Vol 15 ◽  
pp. 91-98 ◽  
Author(s):  
Sónia Fernandes ◽  
Isabel Lourenço
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Research Evidence ◽  
Economic Benefits ◽  
Future Research ◽  
Mandatory Disclosure ◽  
Explanatory Factors ◽  
Disclosure Requirements ◽  
Country Characteristics

This study analyses research evidence on the determinants of compliance with mandatory disclosure requirements, classified in four main areas: business characteristics, country characteristics, enforcement and corporate governance. The literature concerning the compliance with mandatory disclosure requirements is a relatively recent field of research when compared to the literature on voluntary disclosure. Given the well-known economic benefits of disclosure, it is of great interest to academics and practitioners to understand the incentives that explain the behaviour of firms in terms of compliance with disclosure requirements. This review provides several insights. First, although the business characteristics found in different studies as explanatory factors for the level of compliance are not always the same, there are four business characteristics that predominate as explanatory factors of the level of compliance with disclosure requirements: the firm’s size, the firm’s profitability, the type of auditor, and the level of internationalization. Second, the country characteristics and the enforcement have always proved to be relevant when analysing the level of compliance with mandatory disclosure requirements, independently of the approach used. Third, some corporate governance characteristics (including the nature of the board members and the type of ownership/control) begin to emerge as determinants of the level of compliance with mandatory disclosure. Overall, whereas research on the determinants of compliance with mandatory disclosure requirements provides relevant insights, it does not yet provide a sufficient accumulation of empirical evidence. Based on this, we develop suggestions for future research, highlighting the importance of analysing the role of corporate governance on the level of compliance with mandatory disclosure requirements.

The Role of Voluntary Disclosure on Information Asymmetry and Its Impact on the Cost of Capital

2017 ◽  
Vol 23 (9) ◽  
pp. 8389-8394
Author(s):  
Mustafa Yuosef Saa’deh ◽  
Nor Raihan Mohamad ◽  
Hafiza Aishah Hashim
Keyword(s):  
Information Asymmetry ◽  
Voluntary Disclosure ◽  
Cost Of Capital ◽  
The Cost

Economics of Property Law

2017 ◽  
pp. 147-177 ◽  
Author(s):  
Henry E. Smith
Keyword(s):  
Economic Analysis ◽  
Strategic Behavior ◽  
Property Law ◽  
The World ◽  
Governance Strategies ◽  
The Cost ◽  
Mixed Systems ◽  
Asset Partitioning

The economic analysis of property has progressed in areas of property closest to contracts and torts. Property law and economic analysis serves to capture the role of traditional notions of things, possession, and ownership. The theme of property law is the separation of clusters of resource-related activities for treatment in isolation of their context. The treatment of resource-related activities through rights to things chunks together attributes, activities, and duty bearers for wholesale treatment. These modular things emerge from basic possession and accession. The separation of parts of the world for semiformal treatment extends through forms of entity property, asset partitioning, and mixed systems, all of which promote specialization and investment, but separation comes at the cost of potential strategic behavior: actors favor parts of the system from which they benefit more, to the detriment of others. Thus, property law uses exclusion and governance strategies, equitable interventions, and remedies.

scholarly journals Ownership structure and corporate voluntary disclosure-evidence from Taiwan

2009 ◽  
Vol 6 (4) ◽  
pp. 128-134
Author(s):  
Grace M. Liao ◽  
Chilin Lu
Keyword(s):  
Ownership Structure ◽  
Voluntary Disclosure ◽  
Information Disclosure ◽  
Disclosure Quality ◽  
Information Transparency ◽  
Listed Firms ◽  
The Public ◽  
Proprietary Information ◽  
Low Levels ◽  
Transparency And Disclosure

Compared to western markets, listed firms in East Asia typically have low levels of information transparency and do not motivate to disclose proprietary information to the public. One of the most frequently cited reasons for the low level of transparency and disclosure quality is poor corporate governance structures in this region. In this study, we explore the association between ownership structure and voluntary information disclosure in Taiwan. Annual report index data from Information Disclosure and Transparence Ranking System (IDTRS) are used as the proxy of the firm’s voluntary information. The empirical results indicate that the level of information disclosure is likely to be less in “insider” or family-controlled companies.

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