This study investigates the determinants and effects of voluntary book-tax difference (BTD) disclosures in earnings releases. Unlike prior studies, I find no evidence that managers are more likely to voluntarily disclose BTD information when firms have low earnings quality. I also find that managers are more likely to disclose BTD information when firms have large negative but not large positive BTDs. Because BTDs are particularly informative when earnings quality is low and when book income significantly exceeds taxable income (i.e., large positive BTDs), these results suggest that managers selectively disclose BTD information in earnings releases. Interestingly, I also find that managers are more willing to disclose BTD information when tax avoidance activities are high. This result suggests that managers are willing to bear some taxrelated disclosure costs to reassure investors that BTDs are not due to aggressive financial reporting. Prior research provides evidence of a systematic association between BTDs computed using required 10-K tax disclosures and future forecast errors and stock returns. I provide evidence that voluntary BTD disclosures attenuate the association between BTDs and future forecast errors. I also provide limited evidence that voluntary BTD disclosures attenuate the association between BTDs and future stock returns. These results suggest that voluntary BTD disclosures help analysts and investors impound BTD information into earnings forecasts and stock prices. / text

Failure of high profile companies such as Enron, World.com had initiated a call for an investigation to analyse the reason for such radical consequence to prevent further similar financial crises. One of the common factors identified by the researchers is the poor disclosure, transparency and Corporate Governance (CG) mechanisms. Similar to the UK, the compliance towards CG codes are voluntary for the majority of the countries around the globe including Kuwait. CG codes aimed to improve the governance of a company including transparency. Thus, voluntary disclosure had been examined by numerous academics to emphasise the importance of accountability, transparency that in turn increase the confidence of investors and creditors in the financial markets of emerging economies. This thesis is based on Kuwait, as it is a resource rich country and attracts foreign investments. The Central Bank of Kuwait (CBK) issued instructions for CG mechanism especially to the financial sector in 2004. From the research in hand, there was no longitudinal study in Kuwait concerning the impact of GC mechanism to voluntary disclosure. The sample in this thesis consists of 155 Kuwaiti listed companies from 2007 to 2010, 620 firm-year observations. A self-constructed index was developed to evaluate the level of voluntary disclosure and how it developed over time. Both univariate analysis and multivariate analysis were used. Most of the thesis results were consistent with previous studies; there was a gradual increase in the level of voluntary disclosure and its categories over the observed period. All CG mechanisms findings revealed significant associations with voluntary disclosure, except board size and role duality, have a negative significant association. Ownership structure indicates insignificant association with voluntary disclosure. Firm characteristics have a significant positive association with voluntary disclosure, except profitability, has a significant negative association, while gearing is found an insignificant association. Furthermore, the level of voluntary disclosure in the financial sector is higher than the non-financial sector. The contributions to knowledge in this thesis are; 1) It is the first empirical longitudinal study in Kuwait concerning voluntary disclosure, and its relationship with GC mechanism, ownership structure and firm characteristics, as far as the researcher is aware. 2) It provided evidence of the importance of CG to enhancing the level of voluntary disclosure in Kuwait business environment, especially that the level of voluntary disclosure in the financial sector is higher than the non-financial sector. 3) Employed many quantitative methods, such as OSL regression, Normal score, GLS regression, Tobit regression and Quantile regression (divided into 25%, 50% and 75%). 4) A self-constructed index, which was developed in this thesis, could be suitable for other Arab Gulf countries that are similar in the business environment and experiencing the same economic changes. 5) Provides evidence of the possibility of employing the disclosure theories derived from developed countries in emerging countries. 6) It is possible to generalise the results of the disclosure index to other companies not investigated in this thesis. Moreover, this thesis implies that the legislative and regulatory authorities, in particular, the capital markets authority Kuwaiti, need to increase efforts to enhance the role of corporate governance practices in Kuwaiti listed companies.

Recent research documents that voluntary disclosure—in particular, managerial forecast guidance—lowers uncertainty levels, as proxied by option implied variances. In this study I explore the effect of such voluntary disclosure on other dimensions of uncertainty. In particular, I investigate the effect of managerial guidance on the variance risk premium (VRP). Prior research predicts and provides empirical evidence of the VRP, which reflects that implied variances (on average) exceed actual variances, and exists to compensate traders, who sell variance protection for equity options. First, I confirm previous findings that implied variances are lower when firms issue management guidance. Second and more importantly, I document that the VRP is higher when firms provide guidance. I reconcile these seemingly contradictory results by (i) confirming that a significant portion of the increase in VRP is attributable to uncertainty specific to the impending earnings announcement, consistent with the primary role played by the voluntary management disclosure; and (ii) documenting that a higher moment of uncertainty—implied kurtosis levels (i.e., price jump risk)—is higher with managerial guidance. Additional tests examining characteristics of managerial guidance reveal these findings are strongest for firms issuing sporadic guidance, guidance issued close to earnings announcements, and those exhibiting the largest surprise. Overall, the evidence suggests that voluntary disclosure such as management guidance can reduce expected variance, but simultaneously increase higher order moments of uncertainty such as expected price jumps.

This dissertation presents two studies on the value relevance and perceived credibility of pro forma earnings. In the first study, I investigate the value relevance of pro forma earnings relative to two alternative earnings measures GAAP earnings and analysts actual earnings. Value relevance is assessed using two approaches. The first approach examines whether the markets expectations (contemporaneous returns or price) is best reflected in future pro forma earnings, future GAAP earnings, or future analysts actual earnings. The second approach is to determine through pair-wise comparisons of the three earnings measures (e.g., pro forma earnings versus GAAP earnings), which has the greatest explanatory power (comparing adjusted R2s) in explaining price and returns. Across approaches and models, each of the three earnings measures tends to be value relevant. However, Pro forma is consistently the most value relevant, followed by analysts actuals, with GAAP earnings having the least value relevance. That is, pro forma earnings have the greatest information content. This finding is consistent with managers, in aggregate, using pro forma to inform rather than to manage expectations or to mislead. <p>In the second study, I examine the impact of credibility attributes board characteristics, auditor quality and overall information quality on the value relevance of pro forma earnings. It is hypothesized that the credibility attributes will have a statistically significant impact on investors reaction to pro forma earnings. Consistent with the predictions, I find that stronger board characteristics, higher auditor quality and higher overall information quality are positively associated with higher market reaction to the pro forma announcement. That is, credibility attributes increase the value relevance of pro forma earnings. This finding is consistent with some firms providing pro forma earnings that are perceived to be credible and others providing pro formas that are perceived as less credible and possibly provided to manage expectations or to mislead.

Prior literature finds that firms incur a lower cost of debt capital when they voluntarily disclose information. However, the economic literature demonstrates that creditors' lending standards become more stringent (lax) when credit is rationed (abundant) suggesting that they value voluntary disclosure from borrowers differentially across credit market regimes. I draw upon the economic and finance literature on credit rationing to test whether the effects of voluntary disclosure on firms' cost of debt capital is greater during periods of credit rationing. I provide some evidence that confirms this prediction. Moreover, I provide some evidence that this relation is stronger for smaller firms than larger firms during periods of credit rationing suggesting that creditors value voluntary disclosure more from firms that have fewer resources to cover the increased agency cost of lending during periods of credit rationing.

This dissertation presents two studies on the value relevance and perceived credibility of pro forma earnings. In the first study, I investigate the value relevance of pro forma earnings relative to two alternative earnings measures GAAP earnings and analysts actual earnings. Value relevance is assessed using two approaches. The first approach examines whether the markets expectations (contemporaneous returns or price) is best reflected in future pro forma earnings, future GAAP earnings, or future analysts actual earnings. The second approach is to determine through pair-wise comparisons of the three earnings measures (e.g., pro forma earnings versus GAAP earnings), which has the greatest explanatory power (comparing adjusted R2s) in explaining price and returns. Across approaches and models, each of the three earnings measures tends to be value relevant. However, Pro forma is consistently the most value relevant, followed by analysts actuals, with GAAP earnings having the least value relevance. That is, pro forma earnings have the greatest information content. This finding is consistent with managers, in aggregate, using pro forma to inform rather than to manage expectations or to mislead. <p>In the second study, I examine the impact of credibility attributes board characteristics, auditor quality and overall information quality on the value relevance of pro forma earnings. It is hypothesized that the credibility attributes will have a statistically significant impact on investors reaction to pro forma earnings. Consistent with the predictions, I find that stronger board characteristics, higher auditor quality and higher overall information quality are positively associated with higher market reaction to the pro forma announcement. That is, credibility attributes increase the value relevance of pro forma earnings. This finding is consistent with some firms providing pro forma earnings that are perceived to be credible and others providing pro formas that are perceived as less credible and possibly provided to manage expectations or to mislead.

Frågor kring frivillig redovisningsinformation har under senare år varit av växande intresse. Missnöjet med den obligatoriska redovisningen bland investerare och andra nyckelintressenter har bidragit till att kraven på företagen att förse dessa intressenter med mer information ökat. Företag uppmuntras därför att förbättra den ekonomiska rapporteringen. Syftet med studien är att beskriva och förklara vilka faktorer som påverkar företag att lämna frivillig information i årsredovisningar. Uppsatsen bygger på kvantitativ forskningsstrategi då den syftar till att kvantifiera förekomsten av frivillig redovisningsinformation i årsredovisningar. Genom en innehållsanalys av 389 slumpmässigt utvalda aktiebolags årsredovisningar med hjälp av ett kodningsschema kvantifieras den frivilliga informationen. Denna kvantitativa information har sedan statistiskt bearbetats för att kunna bidra till att testa de uppställda hypoteserna. Börsnotering är den faktor som har störst inverkan på mängden redovisad frivillig information och den teori som är mest tillämpbar för att förklara förekomsten av frivillig redovisning är legitimitetsteorin.

<p>Frågor kring frivillig redovisningsinformation har under senare år varit av växande intresse. Missnöjet med den obligatoriska redovisningen bland investerare och andra nyckelintressenter har bidragit till att kraven på företagen att förse dessa intressenter med mer information ökat. Företag uppmuntras därför att förbättra den ekonomiska rapporteringen.</p><p>Syftet med studien är att beskriva och förklara vilka faktorer som påverkar företag att lämna frivillig information i årsredovisningar.</p><p>Uppsatsen bygger på kvantitativ forskningsstrategi då den syftar till att kvantifiera förekomsten av frivillig redovisningsinformation i årsredovisningar. Genom en innehållsanalys av 389 slumpmässigt utvalda aktiebolags årsredovisningar med hjälp av ett kodningsschema kvantifieras den frivilliga informationen. Denna kvantitativa information har sedan statistiskt bearbetats för att kunna bidra till att testa de uppställda hypoteserna.</p><p>Börsnotering är den faktor som har störst inverkan på mängden redovisad frivillig information och den teori som är mest tillämpbar för att förklara förekomsten av frivillig redovisning är legitimitetsteorin.</p>

Banks within Europe have a major role in the European financial system. The financial collapse in 2008 made regulators well aware of the importance of corporate transparency to allow stakeholders to assess the banks health and maintain a stable market. Risk reporting within the European Union (EU) contributes to transparency in terms of disclosing information on risk management activities. The heavy regulations and demand from investors have caused the extent of risk reports to increase over time. The purpose of this research is to investigate if there is a relationship between the quantity of information in risk disclosures and the financial performance for banks in the EU and thus contribute with new knowledge to the field of finance, and increase managers' as well as stakeholders' understanding of the impact of risk reports. The methodological standpoints guide our choices throughout the research process. Our epistemological view is positivism and our ontological view is objectivism. A deductive research approach and a quantitative research method are adopted to collect archival data from risk reports and on financial performance from a sample of 41 banks. Our population consist of banks within the EU. The research design is cross-sectional using data from one point in time, the time period 2013-04-01 - 2014-03-31. Based on relevant theories and previous research, quantity proxies in terms of number of pages, words, characters and recurrence of keywords together with financial performance measures in terms of stock return, standard deviation and beta are used to investigate the relationship. 3 hypotheses are derived and tested by running regressions where the financial performance measures are the dependent variables and our proxies for quality are the independent variables. Our tests show that no significant relationship exists between the quantity of information in risk disclosures and the financial performance of banks within the EU. The results from our research contribute with new knowledge to academics within the field of finance by increasing the understanding of the explanatory variables for financial performance. Moreover, academics may use our results to justify the choice of other proxies than quantity when investigating quality in corporate disclosures. Additionally, our results indicate that practitioners should not use quantity of information in risk reports as an indicator of quality, as no relationship with the financial performance of a bank could be statistically proven.

This study tests a model which suggests that the external forces on a firm, the size and age of the firm, the industry and competitive market in which a firm operates, the level of leverage of the firm, as well as whether it has good or bad news regarding future earnings have an impact on whether a firm provides precise forecasts in its MD&A. Furthermore, the model suggests that firms providing precise forward-looking statements in the MD&A have lower forecast errors. Using 2SLS, the proposed model is tested using forward-looking statements regarding sales, earnings per share, cash flow, and capital expenditures extracted from the 2004 and 2005 annual reports of firms listed on the 2002 Fortune 500 list.