Seminar by Gil Sadka

SALA SEMINARI – 1° PIANO, PALAZZO LEVI CASES, VIA DEL SANTO 33 - ORE 12.30

15.11.2018

Seminar by Gil Sadka, University of Texas 

Title: “Complementarity between Audited Financial Reporting and Voluntary Disclosure: The Case of Former Andersen Clients” (co-authored by R. Frankel, A. Kalay and Y. Zou)

Abstract: Analytical research suggests mandatory periodic reporting disciplines disclosure and encourages timely voluntary disclosure. We examine this hypothesis using the shock to financial reporting quality experienced by former Arthur Andersen clients after they were forced to switch auditors. Consistent with the confirmatory role of mandatory reporting, we find that former Andersen clients increase disclosure following the switch. They increase forecasting frequency and enhance forecasting precision and specificity. They also show less return concentration around earnings announcements in bad-news quarters, consistent with timelier release of bad news (Roychowdhury and Sletten 2012). We supplement our main findings with a battery of tests to rule out the role of alternative shocks in our results. Our findings demonstrate complementarity between financial reporting quality and voluntary disclosures.