Vol. 1 No. 2 (2015)
September 2015: International Business and Global Economy

Articles

Strategic implications of voluntary disclosure and the application of the legitimacy theory

Published 2016-10-12

  • Belle Selene Xia

Belle Selene Xia
University of Helsinki

Abstract

A broad and in-depth review of voluntary disclosure, as the consequential reflection of corporate governance, provides alternative explanations for some the research results discussed in the traditional literature. With regard to the implications of the information asymmetry and the agency theory on voluntary disclosure, we see that the correlation of such is not absolute. In this paper, our understanding in the subject matter is deepened, as we evaluate the various dimensions of corporate disclosure both from a theoretical and an empirical point of view. We discuss the strategic effects as well as the incentives behind corporate disclosure while mirroring the disclosure theory to the legitimacy theory in real life business settings. As we discuss the potential conflicts and drawbacks that researchers and practitioners may have encountered in their previous research, we have discovered that many fundamental research questions related to voluntary disclosure have, in fact, remain unanswered as a result of mixed interpretations. Finally, we propose directions for future research, and subsequently open new research arena to be tested by further research.

Keywords

corporate disclosure, corporate governance, agency theory, information asymmetry

PDF

References

  1. Aboody, D. and Kasznik, R. (2000). CEO Stock Options Awards and the Timing of Corporate Voluntary Disclosures. Journal of Accounting and Economics. 29, 73–100.
  2. Adams, C. A. (2002). Internal Organizational Factors Influencing Corporate Social and Ethical Reporting: Beyond Current Theorizing. Accounting, Auditing & Accountability Journal. 15(2), 223 – 250.
  3. An, Y., Davey, H., Eggleton, I. R. C. (2001). Towards a Comprehensive Theoretical Framework for Voluntary IC Disclosure. Journal of Intellectual Capital. 12(4), S571-585.
  4. Chau, G. K., Gray, S. L. (2002). Ownership Structure and Corporate Voluntary Disclosure in Hong Kong and Singapore. The International Journal of Auditing. 37(2), S247-265.
  5. Cheng, E., C. M., Courtenay, S. M. (2006). Board Composition, Regulatory Regime and Voluntary Disclosure. The International Journal of Accounting. 41(3), 262-289.
  6. Chow, C. W., Wong-Boren, A. (1987). Voluntary Financial Disclosure by Mexican Corporations. The Accounting Review. 63(3), 533-541.
  7. Clinch, G.,Verrecchia, R. E. (1997). Competitive Disadvantage and Discretionary Disclosures in Industries. Australian Journal of Management. 22(2), 125-137.
  8. Darrough, M. N., Stoughton, N. M. (1990). Financial Disclosure Policy in an Entry Game. Journal of Accounting and Economics. 12(1), 219-243.
  9. Dechow, P., Hutton, A., Sloan. R. (2000). The Relation between Analysts’ Forecasts of Long-term Earnings Growth and Stock Price Performance Following Equity Offerings. Contemporary Accounting Research. 17 (1), 1–32.
  10. Dontoh, A. (1989). Voluntary Disclosure. Journal of Accounting, Auditing & Finance. 4(4), 480-511.
  11. Eng, L. L., Mak, Y. T. (2003). Corporate Governance and Voluntary Disclosure. Journal of Accounting and Public Policy. 22(4), 325-345.
  12. Eng, L. L., Mak, Y. T. (2003). Corporate Governance and Voluntary Disclosure. Journal of Accounting and Public Policy. 22(4), 325-345.
  13. Feltham, G. A., Xie, J. Z. (1992). Voluntary Financial Disclosure in an Entry Game with Continua of Types. Contemporary Accounting Research. 9(1), 46-80.
  14. Fields, T., Lys, T., Vincent, L. (2001). Empirical Research on Accounting Choice. Journal of Accounting and Economics. 31, 255–307.
  15. Fishman, M. J., Hagerty, K. M. (2003). Mandatory versus Voluntary Disclosure in Markets with Informed and Uninformed Customers. Journal of Law, Economics and Organization. 19(1), 45-63.
  16. Gary O’Donovan, (2002). Environmental Disclosures in the Annual Report: Extending the Applicability and Predictive Power of Legitimacy Theory. Accounting, Auditing & Accountability Journal. 15(3), 344 – 371.
  17. Gigler, F. (1994). Self-enforcing Voluntary Disclosures. Journal of Accounting Research. 32(2), 224-240.
  18. Healy, P. M., Palepu, K. G. (2001). Information Asymmetry, Corporate Disclosure, and the Capital Markets: A Review of the Empirical Disclosure Literature. Journal of Accounting and Economics. 31(1), 405-440.
  19. Heitzman, S., Wasley, C., Zimmerman, J. (2010). The Joint Effects of Materiality Thresholds and Voluntary Disclosure Incentives on Firms' Disclosure Decisions. Journal of Accounting and Economics. 49(1), 109-132.
  20. Hooghiemstra, R. (2000). Corporate Communication and Impression Management – New Perspectives Why Companies Engage in Corporate Social Reporting. Journal of Business Ethics. 27(1), 55-68.
  21. Hossain, M., Perea, M. H. B., Rahman, A. R. (2007). Voluntary Disclosure in the Annual Reports of New Zealand Companies.” Journal of International Financial Management & Accounting. 6(1), 69-87.
  22. Hughes, J. S., Pae, S. (2004). Voluntary Disclosure of Precision Information. Journal of Accounting and Economics. 37(2), 261-289.
  23. Inchausti, A. G. (1997). The Influence of Company Characteristics and Accounting Regulation on Information Disclosed by Spanish Firms. European Accounting Review. 6(1), 45-68.
  24. Korn, E., Schiller, U. (2003). Voluntary Disclosure of Nonproprietary Information: A Complete Equilibrium Characterization. Journal of Business Finance & Accounting. 30(9), 1327-1339.
  25. Lang, M. H., Lundholm, R. J. (2000). Voluntary Disclosure and Equity Offerings: Reducing Information Asymmetry or Hyping the Stock? Contemporary Accounting Research. 17(4), 623-662.
  26. Legoria, J. (2005). The Voluntary Disclosure of Advertising Expenditures: The Case of the Pharmaceutical Industry and Healthcare Reform. Advances in Accounting. 21, 113-146.
  27. Leuz, C., Verrecchia R. E. (2000). The Economic Consequences of Increased Disclosure. Journal of Accounting Research. 38, 91-124.
  28. Maignan, I., Ralston, D. A. (2002). Corporate Social Responsibility in Europe and the U.S.: Insights from Businesses’ Self-presentations. Journal of International Business Studies. 33(3), 497-514.
  29. McKinnon, J. L.,Dalimunthe, L. (1993). Voluntary Disclosure of Segment Information by Australian Diversified Companies. Accounting & Finance. 33(1), 33-50.
  30. McWilliams, A., Siegel, D. S., Wright, P. M. (2006). Corporate Social Responsibility: Strategic Implications. Journal of Management Studies. 43(1), 1-18.
  31. Patten, D. M. (2002). The Relation Between Environmental Performance and Environmental Disclosure: A Research Note. Accounting, Organizations and Society. 27(8), 763-773.
  32. Penno, M. C. (1997). Information Quality and Voluntary Disclosure. The Accounting Review. 72(2), 275-284.
  33. Prencipe, A. (2004). Proprietary Costs and Determinants of Voluntary Segment Disclosure: Evidence from Italian Listed Companies. European Accounting Review. 13(2), 319-340.
  34. Raffournier, B. (1995). The Determinants of Voluntary Financial Disclosure by Swiss Listed Companies. European Accounting Review. 4(2), 261-280.
  35. Simon, S. M. H., Wong, K. S. (2001). A Study of the Relationship between Corporate Governance Structures and the Extent of Voluntary Disclosures. Journal of International Accounting, Auditing and Taxation. 10(2), 139-156.
  36. Verrecchia, R. E. (1990). Endogenous Proprietary Costs through Firm Interdependence. Journal of Accounting and Economics. 12(1), 245-250.
  37. Wagenhofer, A. (1990). Voluntary Disclosure with a Strategic Opponent. Journal of Accounting and Economics. 12(4), 241-363.

Downloads

Download data is not yet available.

Similar Articles

31-40 of 83

You may also start an advanced similarity search for this article.