Title: The effect of deregulation and capital market incentives on voluntary disclosure in the electric utility industry

Authors: D.G. DeBoskey; Sara Kern

Addresses: The Charles W. Lamden School of Accountancy, College of Business Administration, San Diego State University, 5500 Campanile Drive San Diego, CA 92182-8221, USA ' School of Business Administration, Gonzaga University, 502 E. Boone Ave., AD9, Spokane, WA 99258, USA

Abstract: There are many incentives that impact managers' disclosure decisions. This paper primarily examines one of these incentives - the capital market incentive. We offer a unique setting, the electric utility industry as it transitioned through deregulation, and we show a positive association between voluntary disclosure and deregulation in the post-regulation era. This paper also examines the consistency of four proxies used by accounting researchers to measure disclosure levels: analyst following, analyst forecast revisions, analyst forecast accuracy, and a self-constructed measure. Overall, our results provide empirical evidence that the deregulation of the electric utility industry is strongly associated with an increase in voluntary disclosure, providing additional evidence to support existing theories explaining firms' voluntary disclosure of information. We find mixed supporting evidence for the supplemental proxies. Our findings offer support to regulators that seek to justify the impact of deregulation on disclosure and capital market participants including analysts and firms.

Keywords: voluntary disclosure; capital market incentives; deregulation; electric utility industry; electricity industry; power industry; utilities industry; post regulation; disclosure levels; analyst following; analyst forecast revisions; analyst forecast accuracy; self-constructed measures.

DOI: 10.1504/IJEBR.2015.067365

International Journal of Economics and Business Research, 2015 Vol.9 No.2, pp.186 - 220

Published online: 07 Feb 2015 *

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