Disclosure Interactions: Accounting Policy Choice and Voluntary Disclosure Effects on the Cost of Raising Outside Capital
Accounting and Business Research, Vol. 33, No. 3, pp. 187-205, 2003
Posted: 27 May 2004
Abstract
In this research we consider how disclosure of accounting policy interacts with subsequent choice over voluntary disclosure of a non-financial performance metric. We compare and contrast regimes. In the first, firms are free to choose between a conservative or an aggressive accounting policy before they decide whether to make additional voluntary disclosures. In the other regime, all firms either voluntarily or via mandation use the same accounting policy. We then investigate the cost of raising capital for firms under the two regimes. We show that communication via voluntary disclosure need not be a simple substitute for communication via accounting policy choice.
Keywords: Voluntary disclosure, cost of capital, accounting regulation
JEL Classification: D82, M41, M45
Suggested Citation: Suggested Citation