Abstract
Mandatory disclosure rules force firms to make annual reports publicly available. The publication of (accounting) information, however, is not always in line with their inter-ests as it entails proprietary costs, which can outweigh firm-level benefits. This dissertation analyzes how private firms respond to such mandated disclosure and focuses on managerial discretion to mitigate potentially adverse effects. The first part (Regulation) clarifies the purpose of financial accounting in a private firm setting and discusses aspects of the regulation. In the absence of capital markets, limited ownership-induced agency conflicts, and a strong reliance on debt financing and rela-tionship banking, private firms use financial accounting mostly as a contractual device. Thus, SME accounting is shaped by socio-economic factors and is deeply embedded in countries’ institutional environments. Consistent with this notion, we empirically demonstrate that participants in a public consultation (conducted by the European Commission) support further harmonization and internationalization of SME accounting only for larger firms that use non-EU regulated capital markets. The second part (Timeliness) provides evidence on private firms’ timing decisions of mandatory disclosures. Timeliness crucially determines the informational value of (non)-financial data and thus influences associated indirect costs. We exploit a regulatory setting, where private firms have a great deal of discretion in disclosure timing and are even in the position to “buy” time beyond the legal deadline, when accepting monetary sanctions. The results suggest that firms facing higher proprietary costs exhibit signifi-cantly longer reporting lags and are more likely to overrun the statutory period. We identify performance, the competitive environment and ownership as influencing factors. Moreover, it seems that disclosure timing complements other channels by which a more opaque information environment can be established. The third part (Narratives) focuses on the characteristics of the extensive textual ele-ments of private firms’ disclosures. Namely, we approximate the informativeness of firms’ management reports by relying on the degree of year-over-year similarity (copy-paste). The results indicate that firms with strong incentives to be more opaque systematically modify and update their narrative reports to a lower extent. In line with our ex-pectations, we further find reports with a high degree of copy-paste to be less useful. The content of high-similar reports is less consistent with current accounting numbers and a worse predictor of future earnings. We conclude that firms succeed in creating a more opaque information environment by exploiting copy-paste activities. The final part (Overall) acknowledges that creating opaqueness is not a binary decision but rather the interplay of different managerial choices. Following this notion, the meth-odologically approach of cluster analysis allows to consider data on earnings properties, textual characteristics and…
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