Voluntary disclosure when private information and disclosure costs are jointly determined

Jung Min Kim, Daniel J. Taylor*, Robert E. Verrecchia

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Scopus citations


Classical models of voluntary disclosure feature two economic forces: the existence of an adverse selection problem (e.g., a manager possesses some private information) and the cost of ameliorating the problem (e.g., costs associated with disclosure). Traditionally these forces are modelled independently. In this paper, we use a simple model to motivate empirical predictions in a setting where these forces are jointly determined––where greater adverse selection entails greater costs of disclosure. We show that joint determination of these forces generates a pronounced non-linearity in the probability of voluntary disclosure. We find that this non-linearity is empirically descriptive of multiple measures of voluntary disclosure in two distinct empirical settings that are commonly thought to feature both private information and proprietary costs: capital investments and sales to major customers.

Original languageEnglish (US)
Pages (from-to)971-1001
Number of pages31
JournalReview of Accounting Studies
Issue number3
StatePublished - Sep 2021


  • Adverse selection
  • Capital investment
  • Disclosure costs
  • Major customers
  • Private information
  • Proprietary costs
  • Voluntary disclosure

ASJC Scopus subject areas

  • Accounting
  • General Business, Management and Accounting


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