Costs, Benefits and Explanatory Factors of the Financial Information Disclosure Policy
Manuel Larrán Jorge
The aim of the present paper is to integrate prior disclosure studies in order to analyse the benefits and costs associated to voluntary disclosure policies and the explanatory factors related to the extent of reporting. Among the costs of disclosure we highlight the direct costs of processing, disseminating and auditing the information, and other indirect costs, including legal, political and proprietary costs. The major benefits are related to the lower uncertainty and cost of capital and higher liquidity, credibility and capital market access. Firm size has been found to be the most common corporate characteristic examined with regard to disclosure policies. This is because the larger the company, the higher the agency, political, legal costs and the pressure to report information. On the other hand, larger companies have lower competitive position costs and marginal direct costs due to the disclosure. In this sense, we can affirm that benefits of disclosure are higher than costs of disclosure in larger companies. After analysing some limitations of previous studies we suggest future research in the voluntary disclosure field.
financial reporting, voluntary disclosure, capital markets, information theories.
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