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Disclosure Quality and the Excess Value of Diversification

Disclosure Quality and the Excess Value of Diversification ABSTRACT For a sample of U.S. firm years from 1980 through 1996 we document a positive association between the excess value of diversification as defined by Berger and Ofek (1995) and security analyst ratings of voluntary disclosure as developed by the Association for Investment Management and Research. We also examine an alternative proxy for disclosure quality that captures the degree of segment disaggregation and document a positive association between this measure and excess value. Our results are robust to controls for firm performance and information environment. Taken together, these phenomena suggest that disclosure plays a monitoring role in disciplining management's investment decisions. However, tests of the association between disclosure and the value of firms' investment spending yield mixed results. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting Research Wiley

Disclosure Quality and the Excess Value of Diversification

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References (49)

Publisher
Wiley
Copyright
Copyright © 2004 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0021-8456
eISSN
1475-679X
DOI
10.1111/j.1475-679X.2004.00154.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT For a sample of U.S. firm years from 1980 through 1996 we document a positive association between the excess value of diversification as defined by Berger and Ofek (1995) and security analyst ratings of voluntary disclosure as developed by the Association for Investment Management and Research. We also examine an alternative proxy for disclosure quality that captures the degree of segment disaggregation and document a positive association between this measure and excess value. Our results are robust to controls for firm performance and information environment. Taken together, these phenomena suggest that disclosure plays a monitoring role in disciplining management's investment decisions. However, tests of the association between disclosure and the value of firms' investment spending yield mixed results.

Journal

Journal of Accounting ResearchWiley

Published: Sep 1, 2004

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