On the Effects of Various Degrees of Voluntary Disclosure on Share Returns

by Hannu J. Schadewitz, Antti J. Kanto, Hannu A. Kahra, and Dallas R. Blevins

This study investigates the impact of management reporting market participants. Cumulative abnormal returns are used to assess the markets' reaction to purely voluntary interim disclosures. There are three major findings. One, firms with lower than expected interim disclosure can increase share returns by increasing: (1) earnings and (2) level of disclosure. Two, firms whose interim disclosures correspond with expectations may increase their returns via: (1) increasing earnings and (2) continuing responsible disclosure. Three, the event of publication, itself, is good news for firms whose interim disclosure exceeds expectations. In addition to the major findings: (1) the positive, but low, relationship between returns and earnings found in other studies is confirmed as is (2) the inverse relationship between nonsystematic risk and return.

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