Structural State Dependence of Voluntary Disclosure Decisions

Abstract

This paper investigates whether past disclosure decisions cause the current decision, also known as “structural state dependence.” Using a quasi-natural experiment and a Bayesian hierarchical model, we document positive structural state dependence for management forecast decisions, explaining 70.3% of the intertemporal correlation of management forecast decisions. The positive association between the decision to disclose and firm performance documented by prior studies strengthens with structural state dependence, consistent with the dynamic disclosure theory of Einhorn and Ziv (2008). The paper presents first evidence suggesting that managers’ disclosure decisions are, on average, better characterized by a dynamic model.