Voluntary disclosure incentives and earnings informativeness

Sugata Roychowdhury*, Ewa Sletten

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

45 Scopus citations


We propose that the value of the earnings reporting process as an information source lies in limiting delays in the release of bad news, either by inducing managers to disclose it voluntarily or by directly releasing the negative news that managers have incentives to withhold. We compare earnings informativeness in badnews and good-news quarters. Using returns to measure news, we find, consistent with our prediction, that earnings informativeness relative to other sources is higher in badnews quarters than in good-news quarters. Further, cross-sectional tests indicate that earnings differential informativeness in bad-news quarters is more pronounced when managers do not voluntarily disclose the news, information asymmetry is stronger, and managers are net sellers of stock.

Original languageEnglish (US)
Pages (from-to)1679-1708
Number of pages30
JournalAccounting Review
Issue number5
StatePublished - Sep 2012
Externally publishedYes


  • Earnings
  • Earnings announcements
  • Earnings informativeness
  • Voluntary disclosure

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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