Footnote:
In: Journal of Accounting and Public Policy, Forthcoming
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 14, 2018 erstellt
Description:
This study examines how investors respond to firm disclosure practices that deviate from the majority of industry peers (i.e., industry norms). The SEC has made repeated calls for the disclosure of foreign cash in order for investors to have more information in determining firms' liquidity positions. We examine the association between firm value and the non-disclosure of foreign cash in industries where the majority of firms choose to disclose foreign cash. We define partial disclosure as disclosing permanently reinvested earnings (PRE), but withholding the disclosure of foreign cash, and find that when the majority of industry peers disclose foreign cash, investors discount the firm-specific partial disclosure of foreign operations. This finding suggests that investors have similar information demands as the SEC, and that withholding foreign cash results in a valuation discount. We also find that this discount is greater for firms predicted to have higher levels of foreign cash and higher levels of PRE. Firms with low repatriation costs can avoid the valuation discount for nondisclosure. Results are robust to multiple matched samples and entropy balancing. While prior literature has considered the valuation implications of foreign cash disclosures, we reveal the consequences of opting to withhold the disclosure of foreign cash. Our findings should be of interest to both managers and policy-setters in forming their disclosure protocols