Voluntary Information Disclosure and Corporate Governance: The Empirical Evidence on Earnings Forecasts

Abstract

This study investigates the determinants of companiesʼ voluntary information disclosure. Employing a large and unique dataset on the companiesʼ own earnings forecasts and their frequencies, we conducted an empirical analysis of the effects of a firmʼs ownership, board, and capital structures on information disclosure. Our findings are consistent with the hypothesis that the custom of cross-holding among companies strengthens entrenchment by managers. We also find that bank directors force managers to disclose information more frequently. In addition, our results show the borrowing ratio is positively associated with information frequency, suggesting that the manager is likely to reveal more when his or her firm borrows money from financial institutions. However, additional borrowings beyond the minimum level of effective borrowings decrease the managementʼs disclosing incentive.