Corporate Disclosure Practices Research Articles

The effect of legislation on corporate disclosure practices

This article investigates the effect of the Financial Reporting Act of 1993 (FRA) on mandatory disclosure practices of companies listed on the New Zealand Exchange Limited. The FRA gave statutory backing to financial reporting standards in New Zealand and made non‐compliance illegal. Using both univariate and multivariate analyses, we examine the association between (a) the levels of compliance with mandatory disclosure by the companies in our sample, and (b) disclosure regulatory regimes that prevailed in New Zealand before and after the implementation of the FRA. We find that mean corporate disclosure compliance levels in the periods after the enactment of the FRA are significantly higher than those in the periods before the enactment of the legislation. After controlling for the effects of other mandatory disclosure‐related variables documented in prior studies, we also find that the improvement in corporate disclosure compliance behaviour is the result of the implementation of the FRA. Alternative specifications of the primary regression model indicate that those findings are robust.

The Effect of the S&P T&D Rankings on Market Beta, Abnormal Returns and Earnings Response Coefficients in the Period Surrounding the Report Release Date

This paper investigates whether the Standard & Poors (S&P) transparency and disclosure (T&D)rankings informed the financial markets with respect to firms' corporate governance and disclosure practices when the results of the study were released by S&P on October 15, 2002. The S&P T&D rankings report the relative levels of three disclosure dimensions (ownership structure and investor rights, financial transparency and information disclosure, and board and management structure and process) provided by firms in their annual reports (annual report rankings) and complete regulatory filings (composite rankings). The results suggest that the S&P T&D rankings provided new information to the markets on cross-sectional differences in disclosure, and the market responds unfavorably during the event period to firms with large difference in disclosure levels across annual report and other regulatory filings. Further analyses reveal that the results are driven by the subcategory of ownership structure and investor rights.

Corporate disclosure quality, earnings smoothing, and earnings' timeliness

This paper explores the interaction between corporate disclosure and recognition practices by examining the relation between financial analysts' ratings of disclosure quality, discretionary accruals, and the earnings–return association. The results suggest that firms with higher-quality disclosures use discretionary accruals to smooth earnings more aggressively than firms with lower-quality disclosures. As a result, the timeliness with which accounting earnings capture bad news is inversely related to disclosure quality. These results suggest that higher-quality disclosure can be accompanied by increased earnings management.

Environmental Influences on Voluntary Disclosures in the Annual Reports of Hong Kong and Singapore Companies: A Cultural Perspective

This study investigates the impact of environmental influences, particularly a secretive aspect of Chinese culture, on voluntary corporate disclosure practices. Evidence is provided of the similarly low level of voluntary disclosure by Hong Kong (HK) and Singaporian listed industrial companies. Further, a comparative analysis with prior research on UK/US companies indicates that the extent of voluntary disclosure by HK and Singaporian companies is lower overall. However, while this finding applies to both financial and nonfinancial information, it is not so in the case of strategic information for HK companies.

A Study of Corporate Disclosure Practice and Effectiveness in Hong Kong

The recent economic turmoil in Asia has led to a wider recognition of the importance of corporate transparency and disclosures in financial dealings. The objective of this study is to provide comprehensive and up‐to‐date evidence of current practice and perceived effectiveness of corporate disclosure of listed companies in an emerging economy—Hong Kong. The study compares the perceptions of chief financial officers (CFOs) and financial analysts about a variety of information flow, disclosure and capital market efficiency issues. It also seeks to determine whether there is a perceived need for increased financial reporting regulations and to what extent this and other alternative means might improve market functioning. While both subject groups believed that a majority of firms only adopt a conservative one‐way disclosure strategy and the existence of a communication gap, analysts perceived a much higher need than CFOs for increased financial reporting regulations. Neither group thought that enhancing disclosure requirements alone would suffice to close this gap. Instead, they suggested an improvement in the quality of the communication and disclosure processes through means such as choosing more appropriate communication media, formulating a more proactive disclosure strategy, enhancing investor relationship, and voluntarily reporting more information desired by users.

EXPLORING THE CONTENTS OF THE BALTIMORE AND OHIO RAILROAD ANNUAL REPORTS: 1827–1856

In 1995, a nearly complete collection of the annual reports of the earliest interstate and common carrier railroad in the U. S., the Baltimore and Ohio (B&O), was rediscovered in the archival collection at the Bruno Library of the University of Alabama. Dating from the company's inception in 1827 to its acquisition by the Chessie System in 1962, the reports present a unique opportunity for the exploration, study, and analysis of early U.S. corporate disclosure practice. This paper represents a study of the annual report information made publicly available by one of America's first railroads, and one of the first modern U.S. corporations. In this paper, early annual reports of the B&O which detail its formation, construction, and operation are catalogued as to content and evaluated. Mandated in the corporate charter, the annual “statement of affairs” presented by the management and directors to stockholders is studied as a process and as a product that instigated the institutional corporate practice recognized today as “annual reporting.” Using a single company methodology for assessment of reporting follows a pattern developed by Claire [1945] in his analysis of U.S. Steel and utilized by other researchers. This study demonstrates the use of archival information to improve understanding about the origins and contents of early annual reports and, therein, related disclosure forms.

Discussion of Corporate Disclosure Practices, Institutional Investors, and Stock Return Volatility

Bushee and Noe examine the impact of firms' corporate disclosure practices on the composition of institutional ownership and stock return volatility. The paper's objective is to triangulate two prior research findings: (i) improved corporate disclosure results in higher levels of institutional ownership (Healy, Hutton, and Palepu [1999]) and (ii) institutional ownership is positively associated with stock return volatility (Sias [1996]). Healy, Hutton, and Palepu [1999] argue that one of the benefits from improved disclosure is stock intermediation by attracting institutional investors. Sias [1996] suggests that attracting institutional investors may have the undesirable consequence of increasing stock return volatility. Bushee and Noe extend this literature by documenting that return volatility is influenced by transient institutions that appear to increase their holdings subsequent to disclosure changes. I structure my discussion of this study primarily around the issues discussed at the conference.

Corporate Disclosure Practices, Institutional Investors, and Stock Return Volatility

This paper investigates whether a firm's disclosure practices affect the composition of its institutional investor ownership and, hence, its stock return volatility. The findings indicate that firms with higher AIMR disclosure rankings have greater institutional ownership, but the particular types of institutional investors attracted to greater disclosure have no net impact on return volatility. However, yearly improvements in disclosure rankings are associated with increases in ownership primarily by transient institutions, which are characterized by aggressive trading based on *University of Pennsylvania; tCharles River Associates Incorporated. The authors would like to thank Ray Ball, Mary Barth, Mark Bradshaw, Bob Bowen, Dave Burghstahler, Paul Healy, Amy Hutton, Bjorn Jorgensen, Mark Lang, Charles Lee, Richard Leftwich, Tom Lys, James Myers, Greg Miller, Nancy Rothbard, Krishna Palepu, Ray Pfeiffer, Abbie Smith, Brett Trueman, and an anonymous reviewer, as well as workshop participants at the 1999 American Accounting Association Annual Meeting, the Australian Graduate School of Management, Dartmouth College, Emory University, Harvard University, the 2000Journal of Accounting Research Conference, Massachusetts Institute of Technology, Northwestern University, Ohio State University, the 1999 Stanford University Summer Camp, the University of Iowa, the University of Sydney, the University of Washington, and Washington University-St. Louis for helpful comments and suggestions. Subsets of the Association for Investment Management and Research (AIMR) data used in this paper were generously provided by Christine Botosan, Amy Hutton, Russ Lundholm, Linda Myers, and Marlene Plumlee. The authors gratefully acknowledge the financial support of Harvard Business School's Division of Research and the University of Chicago Graduate School of Business. The opinions expressed in this paper do not necessarily reflect those of Charles River Associates Incorporated.

A Study of the Environmental Disclosure Practices of Australian Corporations

Abstract This paper analyses the environmental disclosure practices of Australian corporate entities. The paper documents three separate but related investigations. First, in a review of a sample of annual reports for the 1991 financial year, it is apparent that environmental disclosure practices adopted by the sample are self-laudatory, with companies promoting positive aspects of their environmental performance, but failing to disclose negative aspects. Second, in a review of corporate disclosure practices in the period 1980 to 1991, environmental disclosure made by the sample significantly increases across time. This change is linked to an apparent increase in societal concern relating to environmental issues. Finally, using a questionnaire administered to environmental lobby groups, it appears that the extent of corporate environmental disclosure is positively associated with the environmental lobby groups' concern about the environmental performance of companies within particular industries.

The Diagnosis and Resolution of Emerging Issues in Corporate Disclosure Practices

Abstract This paper calls the attention of the accounting profession in the UK to a central but neglected process in accounting regulation, i.e. emerging issue diagnosis (EID). A framework for discussing EID is presented in terms of three critical components: inputs, resolution characteristics and outputs. The United States model, which may be influential for future corporate reporting in the UK, is discussed. In addition, consideration is given to a UK example—the City Code on Take-overs and Mergers—of the resolution of emerging issues.

Global Surveys of Corporate Disclosure Practices and Audit Firms: A Review Essay

(1989). Global Surveys of Corporate Disclosure Practices and Audit Firms: A Review Essay. Accounting and Business Research: Vol. 20, No. 77, pp. 47-57.