Disaggregated Discretionary Disclosure and Future Performance


Initial models of discretionary disclosure considered the disclosure of a single number, which subsequent models extended to disaggregated reports. These latter models predict that strong firms disclose less than weak firms, in contrast to the initial models that predict the opposite. We test these competing predictions using firms’ S-1 filings from their initial public offerings and find that a firm’s discretionary disclosure quantity in its S-1 predicts lower future operating and stock performance robustly across many specifications. We also rule out management’s litigation concerns and obfuscation as alternative motives for expanded disclosure.