Current Disclosure Research Articles

The relationship between corporate governance, corruption and forward-looking information disclosure: a comparative study

PurposeThis paper aims to examine the relationship between corporate governance, corruption and disclosure of forward-looking information in listed firms in two African countries, Botswana and Ghana.Design/methodology/approachThe study uses 174 firm-year observations between the period of 2011-2013 for listed firms in the two countries. Each annual report was individually examined and coded to obtain the disclosure of forward-looking information index. Descriptive analysis was performed to provide the background statistics of the variables examined. This was followed by regression analysis which forms the main data analysis.FindingsThe findings show that firms in the least corrupt country, Botswana, disclose more forward-looking information than firms in Ghana, one of the most corrupt countries in sub-Saharan Africa. This confirms the relationship between the transparency level of a country and the transparency level of the listed firms in that country.Originality/valueThis is one of the few studies in sub-Saharan Africa that considered the impact of corporate governance factors on transparency and disclosure of forward-looking information. This study contributes to the literature on the relationship between corporate governance and disclosure by showing that disclosure of forward-looking information in Ghana is associated with the proportion of independent board members. The disclosure of forward-looking information in Botswana on the other hand is influenced by board ownership concentration. The findings of this study will help market regulators in Ghana, Botswana and sub-Saharan Africa, Security and Exchange Commission (SEC) and the Sub-Sahara African Exchanges in evaluating the adequacy of the current disclosure regulations in their countries.

Public Funds Investment Policies: 2016 Survey

The Public Funds Investment Policies Survey is an annual publication, now in its fourth year, which surveys the current investment policy disclosures of the 25 largest (by AUM) sovereign wealth funds (SWFs) in the world, as listed by the Sovereign Wealth Fund Institute, and the 25 largest (by AUM) sovereign pension funds (SPFs). The policies reviewed in this survey were obtained directly from the funds when possible, using data available as of summer 2016. Because a minority of funds (primarily SWFs) do not disclose investment policies, caution should be used in interpreting these results. Many funds may have extensive internal policies but choose not to disclose these policies, and the lack of disclosure should not be taken as evidence that such policies do not exist. When possible, reference was made to other sources of data to corroborate or augment disclosed data.

Food Company Supply Chain Accounting Information Disclosure Policy Research Based on Social Responsibility

This study aims to figure out the food company supply chain accounting information disclosure targets of the social responsibilities in detail, the disclosure principles, the measuring pattern, disclosure mode and the selection of the disclosure indicators. China remains at the primary stage of the social responsibilities disclosure system, the social responsibilities are mainly exposed by the food companies themselves and there are no mature and compulsory disclosure systems at present. However, the food industry is closely connected with people’s daily life, the establishment of the social responsibilities disclosure system in Chinese food companies is related to the people’s health development and the construction of people’s livelihood. To accelerate the disclosure of social responsibilities, this study analyzed the following aspects, namely the current disclosure status of the social responsibilities in Chinese food companies, the disclosure content, disclosure mode and disclosure content, disclosure mode and other aspects. We need to strengthen the disclosure system of the social responsibilities in food companies, improve their food quality and food safety and ensure the food safety through the combined efforts in and out of a food company.

Price Uncertainty and Market Power in Retail Gasoline: The Role of Price Signs on an Italian Highway

We investigate the effect of consumers' price uncertainty and search costs on gasoline price levels. The introduction of a mandatory price disclosure policy on the Italian highway enables us to observe market prices when (a) consumers have no price information; and (b) some information about the prices of competing stations is available to consumers. To characterize the observed pricing outcomes in the marketplace we then propose a model of consumers' sequential search and purchase of gasoline and combine it with a model of gas station pricing. Using data on actual prices and traffic patterns on a particular segment of the highway, we obtain estimates for consumer search costs and other model parameters. Via a counterfactual analysis, we then predict the levels of prices that would prevail in a scenario where consumers have full price knowledge. We also use our model and estimates to measure the stations' market power as a consequence of consumers' lack of price information. We find that when consumers do not have price information, gas stations are able to charge 35.8% more, in terms of higher price-cost margins, than when prices are known. We provide welfare implications of the current mandatory disclosure policy, and quantify the additional benefit of making price information available to all consumers.

Inferring Remediation and Operational Risk from Material Weakness Disclosures

ABSTRACT Understanding the inferences that nonprofessional investors draw from material weakness disclosures is important because of their effect on investment decisions and for assessing whether current standards serve their needs. Prior research shows that users assess higher financial reporting risk for an entity-level material weakness compared to an account-specific material weakness because they perceive the former as presenting a higher risk of potential misstatement. We extend the literature by proposing two variables (remediation and operational risks) that mediate and incrementally explain the observed relationship between the type of material weakness and financial reporting risk assessments. In an experiment involving 181 nonprofessional investors, we find, as predicted, that the entity-level material weakness signals not just a higher potential for undetected misstatements but also higher remediation and operational risks. Further, we find that the two variables fully mediate and incrementally explain the relationship between the type of material weakness and financial reporting risk assessments. To the extent that these variables are decision relevant, our findings suggest that regulators should reconsider and possibly reengineer the current disclosure regime that allows management to disclose unaudited information about these variables. Data Availability: Contact the authors.

Accounting for Financial Instruments: An Empirical Analysis of European Companies

Accounting for financial instruments according to international standards is one of the most sophisticated tasks for standard setters and preparers. Existing empirical research on this topic is rare and mainly concentrates on industry or national situations. Therefore, further research and especially empirical studies are needed to get a better understanding of the recognition, measurement and disclosure of financial instruments. This paper provides current evidence on the practical relevance of financial assets and liabilities in European publicly traded companies listed in the STOXX Europe 600 for the fiscal year 2015. A content analysis shows that financial assets have a stronger importance in the financial industry as in the non-financial industry. We can also demonstrate that a fair value measurement for financial assets and liabilities is only important for the financial industry, while the average usage in the non-financial industry is marginal. Moreover, the critical level 3 fair value, which is based on unobservable data, has only a very low importance in both industries. The often mentioned critique that fair values are not objective and not verifiable is, therefore, unfounded. Surprisingly, we identified substantial problems in the disclosure quality of financial assets and liabilities’ data in the notes which cannot be explained by company specific variables. Especially this finding demonstrates that the comparability of financial statements is not always given and does not improve the usefulness for the various stakeholders and their investment decisions. Researchers are invited to conduct additional studies for other periods and samples which can be helpful to gain further insights as well as to improve the current disclosure shortcomings.

Can We Trust Positive Findings of Intervention Research? The Role of Conflict of Interest.

In recent years, there has been increased attention to the issue of conflict of interest within prevention research. The aims of this paper are to discuss these developments and to relate them to discussions of conflict of interest in the broader scientific literature. Although there has been concern expressed about the extent to which conflicts of interest can be defined and measured, empirical research suggests that financial conflicts can be easily identified and assessed in meta-analyses focused on their effects on research quality. Research evidence also shows that conflict of interest is associated with use of flexible data analysis practices and the reporting of chance positive findings, both within prevention research and related disciplines such as public health and psychology. However, the overwhelming majority of published studies report positive results, and there are a number of other influences within academia (such as pressure to publish) that account for this and for the use of flexible data analysis practices. Accordingly, introducing measures to improve research quality in general, rather than just focusing on problems specific to research in which there is a clearly identifiable conflict of interest, may prove more effective and less controversial. Most such efforts focus on introducing greater transparency into research design, practice, and reporting. These both curtail employment of flexible data analysis practices and make their use transparent to investigators seeking to assess their effects on research quality. Also, requiring detailed disclosures of conflicts be reported by all investigators (not just senior authors) would improve current disclosure practices.

Internal control information disclosure and corporate governance: evidence from an emerging market

Purpose The purpose of this study is to increase our understanding of the impact of corporate governance factors on the disclosure of internal control information by firms in Ghana. Design/methodology/approach A data set from 110 firms in Ghana for the year ending of 2013 was used. Each annual report was individually examined and coded to obtain the disclosure of internal control information index. Descriptive analysis was performed to provide the background statistics of the variables examined. This was followed by regression analysis, which forms the main data analysis method. Findings Results of the disclosure of internal control information mean of 35 per cent indicate that most of the sampled firms did not disclose sufficient internal control information in their annual reports. The low level of internal control information disclosure cannot be used by stakeholders to determine the level of corporate governance practices in the sampled companies. The results of the regression analysis indicate that board independence is a significant variable that explains the disclosure of internal control disclosure. This supports the generally held view that independent directors help to improve the quality of disclosure and increase the transparency of information. Originality/value This is the first study in Ghana that considered the impact of corporate governance factors on internal control information disclosures. This study contributes to the literature on the relationship between corporate governance and disclosure by showing that the disclosure of internal control information in Ghana is associated with the proportion of independent board members. This findings support Sarbanes–Oxley (SOX) 404 requirements, even though this is not compulsory for Ghanaian firms unlike their US counterparts. The findings of this study will help market regulators in Ghana and Sub-Saharan Africa, Security and Exchange Commission (SEC) and the Sub-Saharan African Exchanges in evaluating the adequacy of the current disclosure regulations in their countries. Understanding the board composition and their impact on voluntary disclosure provides evidence on the sufficiency of the board of directors’ guidelines in the corporate governance code in Sub-Saharan African countries.

The Malaysian Disclosure Framework on Executive Directors’ Remuneration: A Critical Review and Closing Its Loops

Disclosure of executive directors’ remuneration especially on their individual pay continues to be a sensitive issue especially in a country like Malaysia where ownership is tightly held and potential rent extractions are significant. The objective of this paper is to provide a critical review on the existing Malaysian disclosure framework on executive directors’ remuneration. It outlines and assesses the current disclosure frameworks in ensuring high level of disclosure on executive directors’ remuneration, covering the Malaysian Corporate Governance Code, the Bursa Malaysia Listing Rule and the Malaysian Financial Reporting Standards. The review shows that there are weaknesses in the overall framework and offer suggestions on how to close the loops in order to improve the level of disclosure of executive directors’ remuneration. It is suggested that the Malaysian regulators adopt a mandatory and prescriptive approach in dealing with the disclosure of executive directors’ remuneration and to step up their enforcement to ensure full compliance to the disclosure framework. DOI: 10.5901/mjss.2015.v6n6p410

Public Fund Investment Policies: 2015 Annual Review

The Public Funds Investment Policies Survey is an annual publication, now in its second year, which surveys the current investment policy disclosures of the 25 largest (by AUM) SWFs in the world, as listed by the Sovereign Wealth Fund Institute, and the 26 largest (by AUM) SPFs, as listed in the Pension & Investments/Towers Watson 300 Ranking (2012). The policies reviewed in this survey were obtained directly from the funds when possible, using data available as of summer 2015. Because a minority of funds (primarily SWFs) does not disclose investment policies, caution should be used in interpreting these results. Many funds may have extensive internal policies but choose not to disclose these policies, and the lack of disclosure should not be taken as evidence that such policies do not exist. When possible, reference was made to other sources of data to corroborate or augment disclosed data.

Exploiting User Behavior Changes in Privacy Disclosure by Modified Clustering Technique

The analysis of user behaviors has been an important subject in recommending research recently. This paper proposes a modified clustering technique, showing that users privacy disclosure may change when they are answering the information requests, and we argues that their attitudes, including risk, useful, appropriate, played an important role behind those changes. We presented the new data structure in our dataset that would be loaded to experiment, e.g. personal information requests, users’ answers to those requests, and most importantly, users cluster and attitude for later analysis. Our modified clustering technique would not only locate users privacy disclosure change by comparing the results from learning their past disclosure behaviors and from learning their current disclosures, but also exploit the relationship between the inconsistence in those two results and their attitudes. The data containing users’ answers to a questionnaire with personal information requests was integrated to analyze their disclosure behaviors and attitude with the proposed clustering technique. We indeed find some interesting connections between their privacy disclosure change and attitudes, and the exploration of this paper could benefit to any researchers and online community owners who focusing on user-centered strategies and personal-information-requesting issues.

What Do Investors Infer About Future Cash Flows from Foreign Earnings for Firms with Low Average Foreign Tax Rates?

This study examines whether investors discount the foreign earnings of U.S. multinational corporations in anticipation of future repatriation taxes. Investor pricing of repatriation taxes has become increasingly important because of the decline in foreign statutory tax rates relative to the U.S. statutory tax rate over the past twenty years combined with the increasing significance of foreign income for U.S. multinationals. Recent comments by regulators suggest they believe current disclosures related to potential repatriation taxes on foreign earnings are insufficient. Consistent with investors pricing repatriation taxes, we observe a significant difference in the earnings response coefficient on changes in foreign earnings of firms with low versus high average foreign tax rates. We also conduct a series of tests to examine whether investor expectations about the likelihood of future repatriation taxes vary as a function of certain firm characteristics. We find no evidence investors differentiate between low foreign tax rate firms based on the likelihood of repatriation.

Risk-Based Vulnerability Disclosure: Towards Optimal Policy

Computing has become increasingly ubiquitous and embedded (as demonstrated by industrial control systems, in-vehicle systems, in-home care systems, and within the energy and transportation infrastructures). As a result, the issue of responsible vulnerability disclosure has returned to the fore. These new computing contexts require revisiting the nature of vulnerabilities and redefining responsible disclosure. The first goal of this work is to critique current disclosure practices. Based upon these critiques, grounded in the history of vulnerabilities, and informed by a series of expert interviews, we propose a model of risk-based responsible disclosure.Research on vulnerability disclosure policy was an early focus in economics of security, particularly until 2006. That earlier research, however, reasonably assumed models of computers that were applicable to desktops, laptops, and servers. That is, there is a centralized source of patches, patching is possible in a very short time frame, patching is low cost, and the issue of physical harm need not be addressed. Current disagreements arise in part from the increasing diversity of both vulnerabilities and their potential impact. There are some clear lines. For example, it is not acceptable to disclose a vulnerability by implementing it and causing harm to victims. There are also well-known reasons for disclosure, specifically for creating incentives for vendors to patch and diffusing information to potential victims for their use in risk mitigation.The trade-offs between transparency and confidentiality are increasingly complex. Responsible disclosure must be equitable: informing the marketplace, incentivizing software manufacturers to patch flaws, protecting vulnerable populations, and simultaneously minimizing the opportunities for malicious actors. To understand and resolve these challenges, we begin with the current state of vulnerability research. Stepping back provides a high-level historical perspective from the first identifiable vulnerability in a mass-produced device (beyond the canonical physical bugs in the first highly custom computers) to the Superfish malware in 2015. We describe extant models of disclosure, identifying the strengths and weaknesses of each of these. After that, we summarize factors previously used as vulnerability (and thus disclosure) metrics. These historical analyses and technical critiques are augmented by a series of interviews with technology and policy experts.For the vast majority of vulnerabilities, the questions of public disclosure are not “if” but rather when and at what level of detail. We conclude that there is now no single optimal disclosure regime. Given this, we advocate for a model of disclosure grounded in risk-based analysis. Such an analysis should be complete and deterministic for a given context. We propose the factors necessary for such a systematic analysis. We then use well-known cases to test the framework and provide illustrative but practical examples.

Necessity of Systematic HIV Disclosure in HIV-infected Families: Committed Communities Development Trusts Approach and Intervention.

Due to greater access to antiretroviral therapy, telling adolescents that they are HIV-infected and/or affected has become an integral and intricate part of the treatment protocol. Despite growing treatment resources from public and private sectors, there is a lack of systematic disclosure for children and adolescents affected and living with HIV/AIDS. Committed Communities Development Trust, a non-government organization working with children and adults infected with and/or affected by HIV, conducted a mixed-methods, cross-sectional study with 33 families in their home-based care program to evaluate their current disclosure protocol. The findings indicate that these experiences implementing and fine-tuning this protocol provide useful lessons for other Indian non-government organizations working with HIV-positive families.

Disclosure of HIV Status to Perinatally Infected Adolescents in Urban Uganda: A Qualitative Study on Timing, Process, and Outcomes

Disclosure of HIV status to children and adolescents living with HIV remains a challenge in pediatric HIV care. Many of the current disclosure guidelines from national and international bodies recommend that perinatally infected children be informed of their HIV status prior to adolescence, but rates of disclosure in both high- and low-income countries remains low. The applicability of the recommendations to low-income countries remains largely unknown, as few studies have explored the disclosure process in these settings. Our purpose was to explore disclosure experiences of HIV-infected adolescents in Uganda. Disclosure was a largely one-time event conducted by health care providers. The average age at disclosure was 13 years. Disclosure elicited a diverse array of positive and negative reactions, including suicidal ideation; reactions were closely associated with participant age, gender, knowledge about HIV, and health status at time of disclosure. Interventions to promote locally effective, process-oriented approaches to early disclosure are needed.

The Effects of Current and Expanded Analyst Ownership Disclosure on Nonprofessional Investorss Judgments and Decision-Making

In two experiments, this study examines the effects of current and expanded analyst ownership disclosure on nonprofessional investors’ confidence in analyst recommendations and on the amount invested by nonprofessionals. Experiment one examines how nonprofessional investors interpret analyst ownership disclosures currently required by Title V of the Sarbanes-Oxley Act of 2002. The results of experiment one suggest that current ownership disclosure requirements have no significant effect on either investors’ confidence in analysts’ recommendations or on the amount ultimately invested in the firm recommended by the analyst. Experiment two extends the first experiment by expanding the granularity of the ownership disclosures provided to investors to incorporate two additional factors: ownership magnitude and ownership duration. Applying Rational Choice Theory, we find evidence of an interactive effect on investors’ judgments such that investors who receive a disclosure that an analyst holds a large, short-term investment in a recommended firm perceive the analyst is more likely to be engaging in puffery than investors who receive alternative disclosures. We also find evidence of mediated-moderation such that investors’ confidence in the analyst’s report mediates the effect of the disclosure on the amount invested. In sum, we find evidence to suggest analyst ownership disclosures affect capital market liquidity and we discuss the implications of our findings for regulators and market operators seeking to improve investor confidence and market liquidity.

Truth Disclosure to Cancer Patients: Shifting Attitudes and Practices of Lebanese Physicians

Background: The disclosure of cancer diagnosis is globally shifting toward preserving patients' autonomy and acknowledging their right to have complete information about their health. In 1995, a survey conducted in Beirut showed that 47% of physicians having potential contact with cancer patients preferred to disclose the full truth to their patients. This study examines current disclosure practices and factors affecting them among Lebanese physicians and compares the results to those of the 1995 study. Methods: A self-administered questionnaire was distributed to and completed by a sample of physicians with potential direct contact with adult cancer patients in the Greater Beirut area. Quantitative methods were used to analyze responses concerning usual disclosure practices, physicians' attitudes and beliefs concerning disclosure, and patient- and physician-related factors affecting disclosure practices. Results: Of the 500 participating physicians, 69% preferred to disclose the full truth to their patients (“Disclosers”). Disclosers were significantly younger, had higher numbers of weekly practice hours, and were more involved in medical teaching than Nondisclosers. Most Disclosers attributed their disclosure practices mostly to medical education and professional experience. They were more likely to believe that patients have the right to know everything about their health, that full disclosure is actually their patients' preference, and that the disclosing physician should preferably be the primary care physician. Conclusions: The percentage of Lebanese physicians who prefer to tell their patients the full truth about a serious diagnosis is increasing, mostly among younger, better informed, more professionally aware practitioners. The trend suggests that disclosure is on its way to becoming a normative practice.

Ethical signposts for clinical geneticists in secondary variant and incidental finding disclosure discussions.

While ethical and empirical interest in so-called secondary variants and incidental findings in clinical genetics contexts is growing, critical reflection on the ethical foundations of the various recommendations proposed is thus far largely lacking. We examine and critique the ethical justifications of the three most prominent disclosure positions: briefly, the clinical geneticist decides, a joint decision, and the patient decides. Subsequently, instead of immediately developing a new disclosure option, we explore relevant foundational ethical values and norms, drawing on the normative and empirical ethical literature. Four ethical signposts are thereby developed to help guide disclosure discussions. These are: respectful sharing of the clinician's expertise; transparent communication; epistemic modesty; and respect for the embedded nature of the patient. We conclude by considering the most common current disclosure positions in the light of the four ethical signposts.

Numerical Formats within Risk Disclosures and the Moderating Effect of Investors' Concerns about Management Discretion

ABSTRACT We report the results of two experiments that provide evidence that investors' risk judgments are affected by the numerical format used to describe outcomes within accounting disclosures. Consistent with prior research in psychology, investors assess higher risk in response to dollar-formatted disclosures than to equivalent percentage-formatted disclosures. Consistent with the Persuasion Knowledge Model (Friestad and Wright 1994), this effect is moderated when investors have both (1) awareness that management has discretion over format, and (2) sufficient cognitive capacity to consider its implications. Our results provide insight about the effects of current disclosure formats and suggest implications for managers who choose formats, investors who interpret formatted information, and regulators who consider whether to further prescribe the formats that are used in financial disclosures.

Performance-Based Consumer Law

When firm and consumer interests are not well-aligned, the resulting transactions are often lousy, whether one uses consumer autonomy or consumer welfare as the metric. With modern experimental and data analysis techniques, firms can run circles around the law’s current disclosure and design rules, yet regulators today are tied to slow, circumscribed responses. What should be added is a regulatory instrument that does three things. First, it should unite the interests of firms with the goals of regulators through performance standards for consumer comprehension and/or suitable consumer product use, thereby redirecting the creative potential of the private sector much as emissions standards do for pollution reduction. Second, the instrument should ground the law on actual consumer knowledge and behavior, rather than hypothesized conceptions of the “reasonable” consumer. Third, it should institutionalize a monitoring system that provides feedback used to improve both the marketplace and regulation in a virtuous cycle. This Article suggests a fresh approach to consumer law, one that has been tried piecemeal in consumer regulation, but until now without a fulsome intellectual foundation. Its aims are both modest – to bring consumer transactions in line with consumer expectations – and ambitious – to make the law as agile as firms. Performance-based consumer law has the potential to incentivize firms to educate rather than obfuscate, develop product designs that align with rather than defy consumer expectations, and channel consumers to products that are suitable for the consumers’ circumstances. Moreover, even if performance-based regulation does not directly lead to dramatic gains in consumer comprehension or marked declines in unsuitable uses of consumer products, the process of establishing and implementing such regulation promises dividends for improving traditional forms of regulation. The article is particularly timely in at least three respects. First, it answers the question implicitly asked by recent critiques of mandated disclosure: what should we do instead? Second, it plots a course for the young Consumer Financial Protection Bureau that has great potential to improve the consumer marketplace and is plainly authorized by the Dodd-Frank Act. Third, the policy structure it proposes would be helpful in a host of areas where policymakers are currently at a loss for what to do, including personal data privacy, payday lending, overdraft, and consumer drug marketing. Performance-based consumer law is more than a technocratic exercise. It is based on and in operation would re-inscribe a normative vision of consumer law that places consumers at the center.