Real assets and voluntary disclosure

Abstract

This study explores whether asset redeployability, i.e., the usability and salability of corporate assets within and across industries, affects corporate voluntary disclosure. I argue that more redeployable assets induce higher agency costs of managerial discretion, which result in a greater demand for public disclosure to monitor managers and safeguard corporate resources. Accordingly, I find that asset redeployability increases both the probability and frequency of management forecasts. This positive relation holds after I correct the endogeneity bias with a propensity score matching method and a quasi-natural experiment approach. Moreover, consistent with the underlying theoretical arguments, the positive effect of asset redeployability on voluntary disclosure is intensified when investor demand for disclosure is stronger and when the agency costs are severer. Collectively, this study provides novel evidence on how a firm’s underlying real assets affect its public disclosure decisions.

Date of Award	2020
Original language	English
Awarding Institution	The Hong Kong University of Science and Technology