Mandatory disclosure and asymmetry in financial reporting

Jeremy Bertomeu, Robert P. Magee*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

21 Scopus citations

Abstract

This paper examines the demand for disclosure rules by informed managers interested in increasing the market price of their firms. Within a model of political influence, a majority of managers chooses disclosure rules with which all firms must comply. In equilibrium, disclosure rules are asymmetric with greater levels of disclosure over adverse events. This asymmetry is positively associated with the informativeness of the measurement and increasing in the level of verifiability and ex-ante uncertainty of the information. The theory also offers implications about the relation between mandatory and voluntary disclosure, when both channels are endogenous.

Original languageEnglish (US)
Pages (from-to)284-299
Number of pages16
JournalJournal of Accounting and Economics
Volume59
Issue number2-3
DOIs
StatePublished - Apr 1 2015

Keywords

  • Certification
  • Financial accounting
  • Mandatory
  • Policy
  • Political

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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