Accounting Papers
Document Type
Journal Article
Date of this Version
4-2011
Publication Source
OR Spectrum
Volume
33
Issue
2
Start Page
333
Last Page
358
DOI
10.1007/s00291-010-0215-2
Abstract
In light of IASB’s statement to drop stewardship as a separate objective of financial accounting and the ongoing debate about increasing the disclosure of soft information, we investigate the economic consequences of publicly reported soft information from a stewardship perspective. In an LEN model we include market price as a performance measure and investigate whether the principal benefits from disclosing additional information. While the principal can only use contractible performance measures in the contract with the agent, capital market participants can only use disclosed information when pricing firm value. We find that the disclosure of information can decrease the principal’s expected net profit. This result follows from either a noisier or a less congruent market price as a consequence of disclosing additional information. Thus, we present a rationale for partial disclosure in the absence of proprietary costs or the uncertainty of information endowment.
Keywords
managerial incentives, stock-based compensation, financial reporting, disclosure
Recommended Citation
Heinle, M. S., & Hofmann, C. (2011). Soft Information and the Stewardship Value of Accounting Disclosure. OR Spectrum, 33 (2), 333-358. http://dx.doi.org/10.1007/s00291-010-0215-2
Date Posted: 27 November 2017