Efficiency of authoritative disclosure recommendations: Evidence from IFRS transition disclosure in Finland
Purpose – This paper aims to explore the potential for disclosure recommendations given by authoritative supervisory bodies to reduce information asymmetry between the management and shareholders. Design/methodology/approach – There is only meagre existing evidence concerning firms' responses to disclosure recommendations. This paper uses descriptive statistics and OLS regression analysis to test if firms behave more similarly to voluntary or to mandatory disclosure when they follow the Committee of European Securities Regulators disclosure recommendation for International Financial Reporting Standards transition. Second, it analyses the determinants of and incentives for recommended transition disclosure. Findings – Recommended disclosure is documented to have more mandatory characteristics than purely voluntary disclosure. Moreover, the certain disclosure incentives for managers and corporate governance factors prove to have an impact on recommended disclosure. Firm size, growth prospects, and independent board members associate positively with recommended disclosure whereas there is a negative relationship between financial leverage and recommended disclosure. Research limitations/implications – The paper does not provide evidence on the cost differences between disclosure laws and authoritative disclosure recommendations. This could be examined by future research. Practical implications – Authoritative disclosure recommendations reduce information asymmetry. In some cases they may be a faster and more cost-efficient way to achieve disclosure enhancements than regulation. Originality/value – This paper is the first to explore the efficiency of authoritative disclosure recommendations in situations where urgent disclosure improvements are needed. The results have implications for regulatory bodies evaluating different strategies to reduce asymmetric information in these situations.
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.