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The aim of this paper is to investigate the impact of voluntary disclosure on information asymmetry between investors and the average information content of subsequent the earnings announcement.

The authors use empirical methodology relying on multiple regression analyses. The authors estimate models of trading volume and stock returns around the earnings’ release date as a function of voluntary disclosures, measured using information in the 8-K statements.

Voluntary disclosures prior to the earnings release date increase trading volume related to stock returns. In addition, voluntary disclosures also reduce stock price movement around that date.

The results indicate that voluntary disclosures increase trading volume related to stock returns around the earnings release date. Such increases indicate increased differential precision among investors, demonstrating that voluntary disclosures increase differences in opinion among investors. The reduced stock price movement around the earnings release date also show that voluntary disclosures reduce the information content of earnings. One limitation is that the measure of voluntary disclosures does not consider the variation in the information content of individual disclosures.

Firms who make voluntary disclosures will need to carefully consider how to structure such releases to minimize asymmetry between investors. Investors should pay greater attention to finding out, and interpreting, voluntary disclosures by firms.

Regulators have previously expressed concern about leveling the playing field between more and less informed investors. The results showing increased differences in information as a result of voluntary disclosures provide valuable insights as regulators debate the balance of mandated and voluntary disclosure.

This is the first study to investigate the effect of voluntary disclosures on information asymmetry among investors using trading volume and, consequently, the first to find increased differences among investors that result from those voluntary disclosures. The paper is also the first to use a direct measure of voluntary disclosure developed by Cooper et al. to demonstrate the negative relation between voluntary disclosure and the average informativeness of earnings announcements.

This paper aims to investigate whether the managers’ emphasis on audit in the management’s discussion and analysis (MD&A) section of the 10-K filing, as part of the firm’s “tone at the top,” is linked to audit quality.

Adopting a computational linguistics approach, the authors measure the manager’s audit emphasis as the frequency of audit-related words in the MD&A. The authors then assess the relationship between audit emphasis and audit quality with ordinary least squares and probit regression models.

This study finds that the manager’s audit emphasis, proxied by the count of audit-related words, is positively associated with audit fees, audit delay, the appointment and retention of Big 4 and industry-specialist auditors, and the probability of switching to Big 4 auditors, while negatively linked to abnormal accruals and the possibility of financial misstatements.

The audit emphasis measure suffers from limitations. The computer program determining audit emphasis may misinterpret words in the MD&A. Researchers need to consider procedures to minimize misinterpretations.

Frequency of audit words in the MD&A reflects the firm’s aspiration for audit quality. Auditors, regulators and investors could ascertain such aspiration from past and current MD&As.

This study associates the manager’s emphasis on audit, measured with computational linguistics from the MD&A, with realized audit quality.

The purpose of this study is to investigate the impact of the age diversity of the top management team (TMT) on firm performance and on the managerial ability of the TMT. Furthermore, this study investigates how the relationship between age diversity and firm performance is mediated by managerial ability and the contextual nature of the relationship.

This is an empirical study which uses regression analyses and mediation analyses to evaluate the hypotheses.

The authors observe a negative relationship between age diversity and firm performance and also between age diversity and managerial ability of the TMT. Further, the authors find that that the negative relationship between age diversity and firm performance is mediated by managerial ability. The authors also find that the relation between performance and age diversity is context specific – the negative relationship between age diversity and firm performance is ameliorated during times of financial crisis.

In an environment where diversity is beginning to be valued, insights into the impact of different types of diversity on performance become important. Age diversity is a critical component of diversity. Therefore, insights into the impact of age diversity on performance will be of interest to managers, academics and even regulators.

To the best of the authors’ knowledge, this study is the first to evaluate the impact of age diversity on the market perception of firm performance of US firms using a large, comprehensive, multi-year data set. Furthermore, this is the only study to evaluate the impact of age diversity on managerial ability and show the mediating effect of managerial ability on the relationship between age diversity and firm performance.

This study aims to provide insights into US and Australian analysts' views regarding the relative importance of disclosing the direct method (DM) or indirect method (IM) statement of cash flows and forecasting firm performance.

Evidence is collected from responses to 104 surveys and 52 interviews completed by US and Australian analysts from 2017 to 2022. The survey and interview questions are developed with reference to the literature.

US and Australian analysts believe that the DM format provides incremental benefits compared to the IM for (1) confirming the reliability of earnings; (2) improving earnings confidence; (3) more accurate ex ante forecasts of operating cash flow and earnings; and (4) identifying opportunistic accruals manipulation. Analysts view that DM disclosure can lower firm-level cost of equity, although US interviewees more uniformly expect lower costs of equity under DM disclosure when firms yield low earnings quality. DM disclosure is also more important during unstable economic periods, as proxied by COVID-19.

Limited research currently exists regarding disclosure of the DM or IM and its impact on analysts' forecasting accuracy, earnings quality, economic uncertainty and cost of equity. Previous research has relied on archival research to examine differences between the DM and IM methods and are limited by data availability. Our findings are particularly relevant to the US market with few US firms reporting the DM format.