Corporate Form and Proprietary Costs of Voluntary Disclosure

Single-segment (focused) firms have a natural disadvantage compared to multi-segment (diversified) with respect to voluntary disclosure policy. Since aggregate disclosures by focused firms are at a finer level of detail than those of diversified firms, the latter have greater ability to react to focused firm information and therefore have a competitive advantage. I provide evidence that focused firms are less likely to provide earnings forecasts even after controlling for typical determinants of forecast issuance including various controls for proprietary costs. This result is the first to show that corporate form is an additional determinant of voluntary disclosure. Tests showing that disclosure ranking is not related to excess value are inconsistent with the alternative explanation that diversified firms reap greater benefits of disclosure. However, tests using additional measures of voluntary disclosures (forecast lead time, specificity, and error) are inconclusive. ∗Monk is a Ph.D. Candidate from Tulane University and can be reached via e-mail at [email protected].