Accounting Papers

Document Type

Journal Article

Date of this Version

10-2016

Publication Source

Management Science

Volume

62

Issue

10

Start Page

2859

Last Page

2870

DOI

10.1287/mnsc.2015.2283

Abstract

This paper studies the propensity of firms to commit to disclose information that is subsequently biased, in the presence of other firms also issuing potentially biased information. An important aspect of such an analysis is the fact that firms can choose whether to disclose or withhold information. We show that allowing the number of disclosed reports to be endogenous introduces a countervailing force to some of the empirical predictions from the prior literature. For example, we find that as more firms issue reports or as the correlation across firms’ cash flows increases, the firm biases its report less. However, when we treat firms’ disclosure choices as endogenous, we show that the number of firms that commit to disclose decreases as the correlation across these cash flows increases, and this, in turn, offsets the direct effect of the correlation on bias.

Keywords

committed disclosure, earnings guidance, bias, multiple firms

Embargo Date

12-30-2016

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Date Posted: 27 November 2017

This document has been peer reviewed.