Title: From event-driven to period-driven Voluntary Earnings Disclosure? A value-adding disclosure strategy

Authors: Jacques Barnea

Addresses: Henley Management College and Brunel University, Greenlands, Henley-on-Thames, Oxon RG9 3AU, UK; Chemin du Tilleul 7, 1380 Lasne, Belgium

Abstract: Research and practice of Voluntary Earnings Disclosure (VED) as a strategy are limited, notwithstanding its evidenced contribution to firm value. An emerging VED profile is identified, characterised and evaluated. Firms applying it regularly provide VED between quarterly earnings announcements. This profile is compared with the prevailing approach of issuing VED when warranted by events and/or when serving firm or management ad hoc interests. These firms| VEDs are found to be more regular, frequent, timely, and often with confirming content. Their VED events, usually midquarter updates, are often prescheduled and specifically named using period-related terms. These controllable characteristics qualify it as a strategy, termed |Period-Driven VED|, in distinction from |Event-Driven VED|. The period-driven VED strategy is found to improve a firm|s information environment through a reduced information gap, measured by abnormal stock returns, lower analysts| forecast error and dispersion, and fewer surprises around earnings-release dates. The firm|s improved information environment leads to lower cost of capital, as evidenced by prior theoretical and empirical research, enhancing firm value.

Keywords: voluntary disclosure; voluntary earnings disclosure; period-driven VED; management forecasting; earnings guidance; corporate financial information; information asymmetry; business governance; midquarter business update; value added; firm value.

DOI: 10.1504/IJBGE.2007.014318

International Journal of Business Governance and Ethics, 2007 Vol.3 No.3, pp.274 - 307

Published online: 01 Jul 2007 *

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