Accounting Quality and Managerial Incentives for Voluntary Disclosure

The central focus of this paper is on how the quality of anticipated mandatory accounting reports affects the bias in and likelihood of voluntary management disclosures. Our model integrates two paradigms used to analyze management disclosures, those in which managers choose to disclose or not when...

Full description

Saved in:
Bibliographic Details
Main Authors: Zang, Yoonseok, KWON, Young Koan
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2008
Subjects:
Online Access:https://ink.library.smu.edu.sg/soa_research/146
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1399863
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Singapore Management University
Language: English
id sg-smu-ink.soa_research-1145
record_format dspace
spelling sg-smu-ink.soa_research-11452010-09-22T09:12:05Z Accounting Quality and Managerial Incentives for Voluntary Disclosure Zang, Yoonseok KWON, Young Koan The central focus of this paper is on how the quality of anticipated mandatory accounting reports affects the bias in and likelihood of voluntary management disclosures. Our model integrates two paradigms used to analyze management disclosures, those in which managers choose to disclose or not when disclosures must be truthful, and those in which managers choose the extent of bias when disclosures always occur. Thus, we incorporate both proprietary (firm-wide) costs of disclosures and personal costs of biasing. In our model, the manager endogenously determines both whether to disclose and, if disclosure occurs, how much to bias the disclosure. We find that increases in the quality of mandatory accounting reports decrease the bias in management disclosures because investors rely relatively less on the disclosures in determining the firm’s value. Further, as the quality of accounting reports increases, the probability of management disclosures also increases because the cost to the manager of biasing the disclosures decreases. Finally, we show that the manager may prefer low to high quality mandatory accounting reports when the proprietary costs of disclosures are large or the manager’s stock-based incentives are large relative to the personal cost of biasing. 2008-05-18T07:00:00Z text https://ink.library.smu.edu.sg/soa_research/146 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1399863 Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University voluntary disclosure mandatory disclosure bias accounting quality Accounting Corporate Finance Human Resources Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic voluntary disclosure
mandatory disclosure
bias
accounting quality
Accounting
Corporate Finance
Human Resources Management
spellingShingle voluntary disclosure
mandatory disclosure
bias
accounting quality
Accounting
Corporate Finance
Human Resources Management
Zang, Yoonseok
KWON, Young Koan
Accounting Quality and Managerial Incentives for Voluntary Disclosure
description The central focus of this paper is on how the quality of anticipated mandatory accounting reports affects the bias in and likelihood of voluntary management disclosures. Our model integrates two paradigms used to analyze management disclosures, those in which managers choose to disclose or not when disclosures must be truthful, and those in which managers choose the extent of bias when disclosures always occur. Thus, we incorporate both proprietary (firm-wide) costs of disclosures and personal costs of biasing. In our model, the manager endogenously determines both whether to disclose and, if disclosure occurs, how much to bias the disclosure. We find that increases in the quality of mandatory accounting reports decrease the bias in management disclosures because investors rely relatively less on the disclosures in determining the firm’s value. Further, as the quality of accounting reports increases, the probability of management disclosures also increases because the cost to the manager of biasing the disclosures decreases. Finally, we show that the manager may prefer low to high quality mandatory accounting reports when the proprietary costs of disclosures are large or the manager’s stock-based incentives are large relative to the personal cost of biasing.
format text
author Zang, Yoonseok
KWON, Young Koan
author_facet Zang, Yoonseok
KWON, Young Koan
author_sort Zang, Yoonseok
title Accounting Quality and Managerial Incentives for Voluntary Disclosure
title_short Accounting Quality and Managerial Incentives for Voluntary Disclosure
title_full Accounting Quality and Managerial Incentives for Voluntary Disclosure
title_fullStr Accounting Quality and Managerial Incentives for Voluntary Disclosure
title_full_unstemmed Accounting Quality and Managerial Incentives for Voluntary Disclosure
title_sort accounting quality and managerial incentives for voluntary disclosure
publisher Institutional Knowledge at Singapore Management University
publishDate 2008
url https://ink.library.smu.edu.sg/soa_research/146
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1399863
_version_ 1770568674158051328