Impact of Voluntary Disclosure on the Relevance of Accounting Information

Abstract

Information disclosure by firms has grown considerably. The increased level of firms’ disclosure has been accompanied by the loss of relevance of accounting information over time (Lev, 1989, Ramech and Thiagarajan, 1995, Lev and Zarowin, 1999, Brown and al, 1999, Chang, 1999 and Chalmers and al, 2011). Our objective is to determine whether the voluntary disclosure explains the low relevance of accounting information. We find that medium-technology companies have the highest level of relevance of accounting information. However, the relevance of the accounting model is low for lowtechnology firms and high technology firms. The introduction of the overall disclosure index and subindexes of disclosure has an effect on the relevance of the accounting model (this effect is significant only in some cases for low-tech firms). Furthermore, the addition of variables of disclosure to the accounting model makes the accounting variables relevant to investors for low-tech firms. For medium-tech firms, book values and earnings are relevant. While, for high technology firms, only the earnings are relevant. We also show that the introduction of intangible expenses, the weight of intangibles and the index of disclosure on intangibles is growing, but not significantly the relevance of the accounting model.