Review of Accounting Studies, 3, 169–173 (1998)
1998 Kluwer Academic Publishers, Boston. Manufactured in The Netherlands.
Discussion of “Bridging the Information Gap:
Quarterly Conference Calls as a Medium for
Kenan-Flagler Business School, University of North Carolina
My comments have three parts: (1) a characterization of the literature, (2) a discussion of
this paper’s contributions and limitations, and (3) some thoughts on potential directions for
future research on conference calls.
At least three observations probably account for the substantial research literature on vol-
untary disclosure. First, there is a signiﬁcant gap between the potentially value-relevant
information that managers have and what they are required to disclose. Management faces
a demand for additional information and continually chooses a response to that information
Second, voluntary disclosure is pervasive. Management consistently provides informa-
tion not required under the mandatory reporting system. At one extreme is purely voluntary
disclosure like many press releases and direct communications with analysts. At the other
extreme, management chooses how much detail to provide in the ﬁnancial statements and
which accounting methods to employ. Third, ﬁrms’ disclosure policies seem to systemati-
cally differ in terms of the amount and types of disclosure provided. Some ﬁrms are known
for being forthcoming while others tend to be much more reticent.
Given these three observations and the long history of voluntary disclosure research, it is
striking that we know relatively little empirically about potentially the most fundamental
voluntary disclosure question: Do ﬁrms beneﬁt from having more forthcoming disclosure
policies and, if so, how do the beneﬁts accrue and how large are they? Put another way,
the literature has little to offer the manager trading off costs and beneﬁts in setting the
ﬁrm’s disclosure policy. I view this as the fundamental question underlying all voluntary
Conceptually, answering the question simply involves correlating a measure of disclo-
sure policy with measures of potential beneﬁts and costs. However, the primary obstacle
confronting researchers in this area has been the difﬁculty in measuring disclosure policy
and the resulting beneﬁts and costs. For example, there are intuitive and theoretical reasons
to believe that voluntary disclosure should reduce cost of capital. However, both the level
of disclosure and cost of capital are notoriously difﬁcult to measure.