Mandatory vs. Voluntary Disclosures: The Cases of Financial and Real Externalities
通过一个多公司模型，比较了公司自愿披露与监管机构强制披露的政策，发现当仅存在财务外部性时，两者常重合；当存在真实外部性时，两者趋于不同。
This paper compares the disclosures firms would seek to make voluntarily with mandated disclosures in a single period, multi-firm model, in which there are covariances between firms' cash flows. This comparison is important because, in those circumstances in which the two types of disclosure coincide, it is possible to economize on the process of setting mandatory disclosures. The principal factors which contribute to the existence or absence of a correspondence between mandatory and voluntary disclosures are (1) the nature of the externality associated with a firm's disclosure, (2) the relation between the risk preferences of the shareholders of the firms making the disclosures and outside investors, (3) how much relative weight is placed on existing shareholders and outside investors' preferences in the social welfare function determining the optimal mandatory disclosure policy, and (4) the covariance structure between firms' cash flows. T | nHIS paper compares the disclosure policies that firms select voluntarily with the policies an accounting standards board or other regulatory body would mandate to maximize social welfare. This comparison is important because of the considerable resources devoted to developing accounting standards and related disclosure requirements. When an accounting standards I wish to thank Mike Fishman, Steve Hansen, Bill Kinney, Bob Magee, and seminar participants at the University of Minnesota for helpful comments on a previous draft, and the Accounting Research Center at Northwestern University for financial support. I especially want to thank Jerry Feltham (a referee) and an anonymous referee. They contributed significantly by extending some results and, in several instances, proposing (and proving) important additional results. Manuscript received August 1987. Revisions received June 1988 and December 1988. Accepted July 1989. This content downloaded from 207.46.13.129 on Sat, 25 Jun 2016 06:03:27 UTC All use subject to http://about.jstor.org/terms 2 The Accounting Review, January 1990 board merely succeeds in mandating the disclosures which firms would adopt voluntarily, the resources used in setting the standards are wasted. By identifying a variety of situations in which mandatory and voluntary disclosures coincide, the paper provides some evidence for Beaver's (1977) proposal that promulgators of accounting standards should be obliged to provide explicit cost-benefit analyses to support the expansion of disclosure regulations. The claim that voluntary and mandatory disclosure requirements should be presumed to be the same, unless otherwise demonstrated, stands in contrast to much of the prevailing scholarly literature on the subject. Proponents of additional mandatory disclosures argue that information about firms' financial conditions constitutes a public good which will be under-provided without regulation. They also assert that firms will tend to suppress the disclosure of unfavorable information. I Opponents of regulation counter by arguing that managers have incentives to disclose information about the firms they run to differentiate themselves from more poorly run enterprises. This incentive, as well as the incentive of investors to obtain trading profits through costly search, are considered to provide sufficient motives for voluntary information production and disclosure so as to ensure a properly functioning securities' market.2 This paper does not directly contradict either of these views. The point made is that, in presenting these externality-based arguments for or against additional disclosures, one must differentiate between the various kinds of externalities that can arise. We consider two alternative types of externalities here, and financial. A disclosure by one firm is said to create a real externality for other firms if the disclosure alters those firms' cash flows. For example, the disclosure of a firm's trade secrets generates positive real externalities for its competitors. In contrast, a disclosure by one firm generates only financial externalities on other firms if the disclosure has the potential of altering the equilibrium prices of those firms without altering the actual distributions of their cash flows. Financial externalities arise when one firm's disclosures affect only investors' perceptions of the distributions of other firms' cash flows. For example, disclosures by one firm in an industry may alter investors' beliefs about the profitability of other firms in the same industry, and thereby change their market values (Foster 1981). Mandatory and voluntary disclosure policies do not always coincide when disclosures generate only financial externalities. Shareholders' attitudes toward risk, shareholders' relative weights in the social welfare function defining the optimal mandatory disclosure policy, and the covariance structure between firms' cash flows can all affect whether voluntary and mandatory disclosure policies coincide. However, there are a variety of circumstances in which these distinctly motivated disclosure policies do coincide when financial externalities alone exist. These disclosure issues are studied using a *snap-shot of an overlapping generations model (Samuelson 1958; Dye 1988) in which one generation of I See, for example, Beaver (1977,1981) or Gonedes and Dopuch(1974) forasummary of these efficiency arguments for and against regulated disclosures. 2 For example, Hirshleifer (1971), Demski (1974), and Wilson (1975) illustrate the possibility of excessive information production by private parties. This content downloaded from 207.46.13.129 on Sat, 25 Jun 2016 06:03:27 UTC All use subject to http://about.jstor.org/terms Dye-Mandatory Versus Voluntary Disclosures 3 shareholders is forced by life-cycle considerations to sell its firms to the next generation of shareholders before the firms' cash flows are realized. Because of this forced-sale assumption, the first generation of shareholders cannot directly share in the risk of the firms' cash flows with the second generation of shareholders. However, they indirectly share in this risk by participating in the stock market on which shares are transferred from one generation to the next. Disclosure policies matter here because disclosures affect the perceived riskiness of the securities when the exchange of shares takes place, and so disclosure policies affect risk-sharing between the two generations of shareholders. This paper builds upon Demski (1973, 1974) who showed that (1), in general, rankings of information systems may not be complete, and (2) the selection among financial reporting systems may have redistributive consequences. These papers indicate that progress in comparing financial reporting systems depends on identifying more restricted settings where such rankings are viable. The present paper pursues this line of inquiry and reveals the following: in many contexts where comparisons of information systems are most easily made-where only financial externalities are present-mandated disclosures are superfluous, because the optimal mandated disclosures simply coincide with firms' voluntary disclosure decisions. Where comparisons of information systems are most difficult-where real externalities are present-optimal mandatory and equilibrium voluntary disclosure tend to diverge. The paper proceeds as follows. Section I outlines the basic model. Section II provides the preliminary analysis, by studying the disclosures which representative market participants with common objectives make. Sections III and IV, respectively, study disclosures with financial and real externalities. Section V concludes the paper. I. Model Description for Disclosures with Financial Externalities The basic chronology of events corresponding to this model of disclosure requirements is summarized in the following time line: Entrepreneurs Entrepreneurs Security market Investors learn (indexed by choose disclosures opens; entrepreneurs realized values (i) =1. . .,n) own all policies (ri), and sell their firms of cash flows. firms. Firm i's cash produce information (at prices P) flows, denoted 2, (x,) according to the to investors. are distributed disclosure policies ( .ll ... * , I they select. ~-N(jA,). Priors on