The Value Relevance of Disclosing a Single Corporate Target

Abstract

This paper explores the relationship between disclosing corporate targets and value creation. Our empirical results show the value relevance of voluntarily disclosing a low number of targets, whereas there is a clear additional positive effect of disclosing exactly one corporate target in the annual report. Moreover, the value relevance of "rolling out" a single target to the business unit level in organizations is confirmed by our survey research among the same set of companies. These results support our Accountability Principle and Jensen's (2002) argument that "purposeful behavior requires a single-valued objective function".

Keywords: targets, organizational purpose, objective, value creation, incentives, disclosure

JEL Classification: L21, J33, G34, M40, M46