Voluntary Disclosure Dynamics under Risk and Ambiguity for Digital Corporates in Tehran Stock Exchange Market
الموضوعات :Mohammad Feghhi Kashani 1 , Teimor Mohammadi 2 , Hadi Pirdaye 3
1 - Department of Economics, University of Allameh Tabatabaei, Tehran, Iran.
2 - Department of Economics, Allameh Tabatabai University, Tehran,Iran
3 - Department of Financial Economics, University of Allameh Tabatabaei, Tehran, Iran
الکلمات المفتاحية: Ambiguity Aversion, Stock Return Volatility, Dynamic Voluntary Disclosure, Firm and Market Ambiguity,
ملخص المقالة :
This study aims at investigating the effects of the change in the information environment from risk to ambiguity, disclosure dynamics, and the ambiguity aversion behavior of investors on the disclosure of integrated information for selected corporates operating in digital industry listed on the Tehran Stock Exchange during 2012-2022. The corporate voluntary disclosure lag, stock return volatility, and the probability of favorable returns incidence represent respectively the disclosure dynamics, firm risk, and investors' ambiguity aversion, within dynamic panel models. To investigate robustness of the estimates we have also included capital market ambiguity, firm size and stock liquidity indices in the model. The findings are consistent with existing theories. Firm risk and the capital market ambiguity have an increasing impact on the integrated information voluntary disclosure. However, the ambiguity at firm's level has decreased its voluntary disclosure. Likewise, a rise in ambiguity aversion (in-dependent of the ambiguity level), which makes investors more pessimistic about the firm's cash flows, makes the manager to increase the level of voluntary disclosure. Further, inertia in voluntary disclosure has been detected among the studied digital corporates. Depending on the magnitudes of the risk, ambiguity, ambiguity aversion, and the source of investors' ambiguity, the corporate managers decide on their voluntary disclosure policy appropriately.
[1] Healy, P. M., Palepu, K. G., Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature, Journal of accounting and economics, 2001; 31(1-3):405–440.
doi: 10.1016/S0165-4101(01)00018-0
[2] Kılıç, M., Kuzey, C., Determinants of forward-looking disclosures in integrated reporting, Managerial Auditing Journal, 2018; 33(1):115–144. doi: 10.1108/MAJ-12-2016-1498
[3] Oliveira, L., Rodrigues, L. L., Craig, R., Intellectual capital reporting in sustainability reports, Journal of Intellectual Capital, 2010. doi: 10.1108/14691931011085696
[4] García-Sánchez, I.-M., Rodríguez-Ariza, L., Frías-Aceituno, J.-V., The cultural system and integrated reporting, International business review, 2013; 22(5):828–838. doi: 10.1016/j.ibusrev.2013.01.007
[5] Ioana, D., Adriana, T.-T., Research agenda on integrated reporting: new emergent theory and practice, Procedia Economics and Finance, 2014; 15: 221–227. doi: 10.1016/S2212-5671(14)00488-2
[6] Bertomeu, J., Beyer, A., Dye, R. A., Capital structure, cost of capital, and voluntary disclosures, The Accounting Review, 2011;86(3):857–886. doi: 10.2308/accr.00000037
[7] Md Zaini, S., Samkin, G., Sharma, U., Davey, H., Voluntary disclosure in emerging countries: a litera-ture review, Journal of Accounting in Emerging Economies, 2018; 8(1): 29–65. doi: 10.1108/JAEE-08-2016-0069
[8] Grossman, S. J., The informational role of warranties and private disclosure about product quality, J Law Econ, 1981; 24(3): 461–483. doi: 10.1086/466995
[9] Milgrom, P. R., Good news and bad news: Representation theorems and applications, The Bell Journal of Economics, 1981; 380–391. doi: 10.2307/3003562
[10] Song Shin, H., Disclosure risk and price drift, Journal of Accounting Research, 2006; 44(2):351–379. doi: 10.1111/j.1475-679X.2006.00204.x
[11] Guttman, I., Kremer, I., Skrzypacz, A., Not only what but also when: A theory of dynamic voluntary disclosure, American Economic Review, 2014;104(8):2400–2420. doi: 10.1257/aer.104.8.2400
[12] Knight, F. H., Risk, uncertainty and profit, Houghton Mifflin, 1921, 31.
[13] Ferracuti, E., Stubben, S. R., The role of financial reporting in resolving uncertainty about corporate investment opportunities, Journal of Accounting and Economics, 2019; 68(2-3):101248. doi: 10.1016/j.jacceco.2019.101248
[14] Kim, J. M., Taylor, D. J., Verrecchia, R. E., Voluntary disclosure when private information and disclo-sure costs are jointly determined, Review of Accounting Studies, 2021; 26(3): 971–1001.doi: 10.1007/s11142-021-09601-z.
[15] Barry, C. B., Brown, S. J., Differential information and the small firm effect, J financ econ, 1984; 13(2): 283–294. doi: 10.1016/0304-405X(84)90026-6
[16] Lambert, R., Leuz, C., Verrecchia, R. E., Accounting information, disclosure, and the cost of capital, Journal of accounting research, 2007; 45(2): 385–420. doi: 10.1111/j.1475-679X.2007.00238.x
[17] Kothari, S. P., Li, X., Short, J. E., The effect of disclosures by management, analysts, and business press on cost of capital, return volatility, and analyst forecasts: A study using content analysis, The Ac-counting Review, 2009; 84(5):1639–1670. doi: 10.2308/accr.2009.84.5.1639
[18] Rava, A., Beyond Risk: Voluntary Disclosure Under Ambiguity, Available at SSRN 4100755, 2022. doi: 10.2139/ssrn.4100755
[19] Epstein, L., Schneider, M., Learning under ambiguity, Rev Econ Stud, 2007; 74(4): 1275–1303. doi: 10.1111/j.1467-937X.2007.00464.x
[20] Izhakian, Y., Yermack, D., Zender, J., Ambiguity and the Tradeoff Theory of Capital Structure, Na-tional Bureau of Economic Research, Cambridge, MA, Nov. 2016. doi: 10.3386/w22870
[21] Brenner, M., Izhakian, Y., Asset pricing and ambiguity: Empirical evidence, J financ econ, 2018;130(3): 503–531. doi: 10.1016/j.jfineco.2018.07.007
[22] Izhakian, Y., A theoretical foundation of ambiguity measurement, J Econ Theory, 2020; 187: 105001.
doi: 10.1016/j.jet.2020.105001
[23] Didar, H., Mansourfar, G. R., Khojaste, H., The Impact of Firm’s Attributes on the Disclosure Level of the Listed Companies in Tehran Stock Exchange, Empirical Studies in Financial Accounting, 2011; 8(32):141–168. doi: 20.1001.1.28210166.1389.8.32.7.4
[24] Hajian, N., Anvary Rostamy, A. A., Rahmani, A., Azar, A., Investigating Effective Factors on Disclo-sure Scores of Listed Companies in Tehran Stock Exchange, Journal of Financial Accounting Research, 2015; 7(1):71–92. doi: 20.1001.1.23223405.1394.7.1.6.3
[25] Billings, M. B., Jennings, R., Lev, B., On guidance and volatility, Journal of Accounting and Econom-ics, 2015; 60(2-3): 161–180. doi: 10.1016/j.jacceco.2015.07.008
[26] Agbetonyo, Y. S., Fromont, E., Viviani, J.-L., Asymmetric responses to dividend announcements, Re-vue de l’OFCE, 2018; 77–104. doi: 10.3917/reof.160.0077
[27] Asthana, S., Kalelkar, R., Impact of economic policy uncertainty on disclosure and pricing of earn-ings news, Review of Quantitative Finance and Accounting, 2020; 55(4): 1481–1512. doi: 10.1007/s11156-020-00881-1
[28] Shams Koloukhi, A., Mehrazeen, A. R., Massihabadee, A., Shorvarzi, M. R., Voluntary Information Disclosure: A Tool for Organizational Leadership, Iranian Journal of Accounting, Auditing and Finance, 2018; 2(2). doi: 10.22067/ijaaf.v2i2.75366.
[29] Bun, M. J. G., Carree, M. A., Bias-corrected estimation in dynamic panel data models, Journal of business & economic statistics, 2005; 23(2): 200–210. doi: 10.1198/073500104000000532
[30] Arellano, M., Bond, S., Some tests of specification for panel data: Monte Carlo evidence and an ap-plication to employment equations, Rev Econ Stud, 1991; 58(2):277–297. doi: 10.2307/2297968
[31] Muttakin, M. B., Mihret, D., Lemma, T. T., Khan, A., Integrated reporting, financial reporting quality and cost of debt, International Journal of Accounting & Information Management, Jan. 2020; 28(3): 517–534. doi: 10.1108/IJAIM-10-2019-0124.
[32] Botosan, C. A., Disclosure level and the cost of equity capital, Accounting review, 1997; 323–349.
doi: stable/248475
[33] Nagar, V., Schoenfeld, J., Wellman, L., The effect of economic policy uncertainty on investor infor-mation asymmetry and management disclosures, Journal of Accounting and Economics, 2019; 67(1):36–57.
doi: 10.1016/j.jacceco.2018.08.011
[34] Williams, C. D., Asymmetric responses to earnings news: A case for ambiguity, The Accounting Re-view, 2015; 90(2):785–817. doi: 10.2139/ssrn.1470085
[35] Scholes, M., Williams, J., Estimating betas from nonsynchronous data, J financ econ, 1977; 5(3):309–327. doi: 10.1016/0304-405X(77)90041-1
[36] Cotter, J., Tuna, I., Wysocki, P. D., Expectations management and beatable targets: How do analysts react to explicit earnings guidance? Contemporary accounting research, 2006; 23(3):593–624. doi: 10.1506/FJ4D-04UN-68T7-R8CA
[37] Houston, J. F., Lev, B., Tucker, J. W., To guide or not to guide? Causes and consequences of stopping quarterly earnings guidance, Contemporary Accounting Research, 2010; 27(1):143–185. doi: 10.2139/ssrn.875184
[38] Chen, S., Matsumoto, D., Rajgopal, S., Is silence golden? An empirical analysis of firms that stop giv-ing quarterly earnings guidance, Journal of Accounting and Economics, 2011; 51(1-2): 134–150. doi: 10.1016/j.jacceco.2010.10.006
[39] Rogers, J. L., Van Buskirk, A., Bundled forecasts in empirical accounting research, Journal of Ac-counting and Economics, 2013; 55(1):43–65. doi: 10.1016/j.jacceco.2012.06.001
[40] Leuz, C., Wysocki, P. D., Economic consequences of financial reporting and disclosure regulation: A review and suggestions for future research, Available at SSRN 1105398, 2008. doi: 10.2139/ssrn.1105398
[41] Hope, O.-K., Liu, J., Does stock liquidity shape voluntary disclosure? Evidence from the SEC tick size pilot program, Review of Accounting Studies, 2022; 1–38. doi: 10.1007/s11142-022-09686-0
[42] Celik, O., Ecer, A., Karabacak, H., Disclosure of forward -looking information: Evidence from listed companies on Istanbul Stock Exchange (ISE), Investment Management and Financial Innovations, 2006; 3(2):197–216.
[43] aghaie motealeghi, n., Alikhani, R., maranjory, m., samadi largani, M., Explanation of the quantitative and qualitative dimensions of forward-looking information disclosure in the annual reports of companies in Iran, Journal of Management Accounting and Auditing Knowledge, 2023; 12(46):459–472.
[44] Wallace, R. S. O., Naser, K., Firm-specific determinants of the comprehensiveness of mandatory dis-closure in the corporate annual reports of firms listed on the stock exchange of Hong Kong, Journal of Accounting and Public policy, 1995; 14(4):311–368. doi: 10.1016/0278-4254(95)00042-9
[45] Hamidian, N., Arabsalehi, M., Amiri, H., Investigating Investors’ Reaction to firms’ Annual Earnings Announcement with considering the market uncertainty and information uncertainty, Journal of Account-ing Advances, 2018; 10(1): 64–97. doi: 10.22099/jaa.2018.27132.1631.
[46] Amihud, Y., Illiquidity and stock returns: A revisit, Critical Finance Review, Forthcoming, 2018. doi: 10.1561/104.00000073
