TO TELL OR NOT TO TELL: MARKET VALUE OF VOLUNTARY DISCLOSURES OF INFORMATION SECURITY ACTIVITIES

This study measures the economic consequences of information security activities, in general, and more specifically the market value of disclosures of information security activities. Since information security activities are primarily non-revenue generating, management tends to view them as the cost-of-doing-business, with no impact on firm value. Furthermore, managers are reluctant to share the details, because that they do not want to attract the attention of hackers. However, voluntary disclosures of information security can help reduce information asymmetry, which leads to belief revisions by investors, and hence corrects the misspecifications (if any) of the firm's market value. In other words, voluntary disclosures of security activities are signaling mechanisms. The objective of this dissertation is to develop a taxonomy of disclosures of information security activities, and empirically test the value relevance of such disclosures. Based on a sample of 1,637 disclosing firms, the empirical results provide support for the argument that voluntary disclosures of information security activities are value-relevant. Industry-wide analyses support the disclosure taxonomy developed, and highlight that firms which are technology and data-dependent, have the most impact from these discretionary disclosures of information security activities. These results are robust to various sensitivity checks, including matched-pair design, returns model, and the model that corrects for self-selection bias. The main contributions of this research are three-fold: 1) it adds to the discretionary disclosure literature by supporting the signaling hypothesis, 2) it adds to the extant literature on value-relevance vis-à-vis the importance of intangible voluntary disclosures, and 3) it adds to the information security literature concerning the value of information security-related activities to organizations. Future directions highlight the rich stream of potential research, based on the dataset collected as a part of this stud

Cool Response: The SEC & Corporate Climate Change Reporting

Climate change and its regulation pose significant risks and opportunities to investors and corporations. The nearly 30 billion in insured losses from Hurricane Sandy alone dramatically underscore this reality. New climate-related federal and state regulations in recent years also present risks and opportunities to companies in the electric power, coal, oil & gas,transportation and insurance sectors. Investors seek greater transparency and disclosure on the business risks of climate change as a means to protect and increase shareholder value.The key regulator that leads federal efforts to provide investors with information about corporaterisks and opportunities is the U.S. Securities and Exchange Commission (SEC). At the heart of the SEC's mission is the protection of investors through meaningful corporate reporting:The laws and rules that govern the securities industry in the United States derive from a simpleand straightforward concept: all investors, whether large institutions or private individuals,should have access to certain basic facts about an investment prior to buying it, and so longas they hold it. To achieve this, the SEC requires public companies to disclose meaningfu lfinancial and other information to the public. Only through the steady flow of timely,comprehensive, and accurate information can people make sound investment decisions. The SEC recognized the financial impacts of climate change when it issued Interpretive Guidance on climate disclosure in February 2010, responding to over 100 institutional investors representing 7 trillion who supported the Guidance. The Guidance outlines expectations from companies in reporting on "material" regulatory, physical, and indirect risks and opportunities related to climate change.This report examines the state of such corporate reporting and associated SEC comment letters on climate change. It also provides recommendations for the SEC and companies on improving the quality of reporting. The report examines (1) the state of S&P 500 reporting onclimate disclosure and (2) SEC comment letters addressing climate disclosure from 2010 to the end of 2013

ROMANIAN COMPANIES’ WEB-BASED DISCLOSURE CHOICES AND CAPITAL MARKETS

This article aims to investigate the web-based disclosure choices andpractices among Romanian companies listed on Bucharest Stock Exchange. Web-based disclosure offers advantages that are absent in paper-based voluntarydisclosure: it can be accessed globally at much lower costs and it can be updatedmuch more timely also at much lower costs. Another goal of the paper is to establishthe criteria in order to select properly the sample companies. After presenting theadvantages and eventual risks of Internet Financial Reporting and analyzing previousinvestigative reports and articles, this paper investigates the degree to whichRomanian listed companies to disclose financial and non-financial information areusing the Internet. The web sites of these companies were examined throughout May2007 to May 2008, with a view to determining which companies present voluntaryfinancial or non-financial data in addition to the Annual Report and Accounts.internet financial reporting, mandatory and voluntary disclosure, capital markets,listed companies

Levels of voluntary disclosure in IPO prospectuses : an empirical analysis

This paper focuses on how forecasts information is disclosed in IPO prospectuses. In France, managers report either detailed forecasts or only a brief summary. We investigate the determinants and consequences of the varying levels of detail provided in these forecasts. Based on a sample of 82 IPOs on the Euronext Paris market (2000-2002), we show that only two variables are associated with highly detailed forecast disclosures: forecast horizon and firm age. We also find that the forecast error decreases as the level of detail in the forecast disclosures increases. This finding is robust to our reverse causality test (Heckman two-stage self-selection procedure) and suggests that the level of detail in forecast disclosures enhances the reliability of earnings forecasts.IPO; forecast disclosure; forecast error

Disclosure measurement in the empirical accounting literature: A review article

This is the first study to provide an extensive and critical review of different techniques used in the empirical accounting literature to measure disclosure. The purpose is to help future researchers to identify exemplars and to select suitable techniques or to develop their own techniques. It also provides in depth discussion of current measurement issues related to disclosure and identifies gaps in the current literature which future research may aim to cover

INNOVATIONS IN SOCIAL AND ENVIRONMENTAL REPORTING BASED ON THE KNOWLEDGE OF STAKEHOLDERS’ INFORMATION NEEDS

Starting form the accounting status as a social and institutional practice and the economic role of financial reporting, the paper addresses the issue of social and environmental accounting and reporting regulation.We propose an analysis of the main repsocial and environmental reporting, voluntary disclosure, regulation, shareholder value, stakeholder value, risk

International differences in R&D disclosure practices : evidence in a French and Canadian context

This paper compares the R&D disclosure practices in France and Canada, as evidenced in the annual reports of 76 French and 110 Canadian listed companies. It finds that Canadian high-tech companies (hardware, software, and biotechnology) disclose significantly more information on their R&D activities than their French counterparts. It also finds a strong link between R&D intensity and R&D disclosure among Canadian high-tech companies. Canadian companies overall are also found to be more likely to use non-financial disclosure as a means to resolve any R&D information asymmetry, while French firms disclose more traditional financial and accounting information. Canadian companies are also more willing than French firms to provide information concerning their future R&D expenditures. These results are consistent with inherent cultural and capital market differences between France and Canada. In contrast, the study does not find any significant difference in R&D expenditure capitalization policies between French and Canadian firms.R&D disclosure; France; Canada

Periodic Reporting in a Continuous World: The Correlating Evolution of Technology and Financial Reporting

The evolution of technology has drastically altered what it means to be a reporting company in the eyes of the Securities and Exchange Commission. Technological development has also played a large role in the shifting trend from periodic reporting to continuous reporting, as is particularly apparent in the evolution of the Form 8-K. It is true that the increasingly technological world of continuous reporting does not come without disadvantages. This issue brief, however, argues that despite the increased risks and challenges of continuous reporting, its net effect on disclosure, and the investing community generally, is positive. With that benefit in mind, this paper further suggests four new amendments to the Form 8-K

The Essential Role of Securities Regulation

This Article posits that the essential role of securities regulation is to create a competitive market for sophisticated professional investors and analysts (information traders). The Article advances two related theses-one descriptive and the other normative. Descriptively, the Article demonstrates that securities regulation is specifically designed to facilitate and protect the work of information traders. Securities regulation may be divided into three broad categories: (i) disclosure duties; (ii) restrictions on fraud and manipulation; and (iii) restrictions on insider trading-each of which contributes to the creation of a vibrant market for information traders. Disclosure duties reduce information traders\u27 costs of searching and gathering information. Restrictions on fraud and manipulation lower information traders\u27 cost of verifying the credibility of information, and thus enhance information traders\u27 ability to make accurate predictions. Finally, restrictions on insider trading protect information traders from competition from insiders that would undermine information traders\u27 ability to recoup their investment in information. Normatively, the Article shows that information traders can best underwrite efficient and liquid capital markets, and, hence, it is this group that securities regulation should strive to protect. Our account has important implications for several policy debates. First, our account supports the system of mandatory disclosure. We show that, although market forces may provide management with an adequate incentive to disclose at the initial public offering (IPO) stage, they cannot be relied on to effect optimal disclosure thereafter. Second, our analysis categorically rejects calls to limit disclosure duties to hard information and self-dealing by management. Third, our analysis supports the use of the fraud-on-the-market presumption in all fraud cases even when markets are inefficient. Fourth, our analysis suggests that in cases involving corporate misstatements, the appropriate standard of care should, in principle, be negligence, not fraud

Mandating Disclosure in Municipal Securities Issues: Proposed New York Legislation

This article surveys the existing mechanisims (primarily stemming from federal law) resulting in financial disclosure in connection with the offering and sale to the public of securities of New York municipal issuers. It also describes and compares alternative models for regimes of municipal issuer financial disclosure, such as the MFOA Guidelines, the federal Williams Bill and Industrial Bond Act and New York\u27s Disclosure Proposals. The article ultimately concludes that although the isolated purpose of protecting investors in a municipal securities market that is largely national could most effectively be pursued by the imposition of uniform disclosure requirements through federal law, the Disclosure Proposals are not demonstrably inadequate to this purpose, and the intrustion into the affiars of the state and local governments of New York that would accompany the federal law approach makes the enactment of the Disclosure Proposals a more attractive alternative