Essays on Disclosure Practices in Sweden - Causes and Effects
Abstract: This doctoral thesis examines the causes and effects of corporate disclosure practices. The thesis consists of four independent but related essays that collectively make up a country study for Sweden. The first essay aims to explain why some firms have a proactive disclosure strategy while others devote less resources and effort to disclosure and investor relations. Information about Swedish firms' disclosure strategies was collected by questionnaire. The results show that the probability of a firm claiming it has a proactive disclosure strategy increases with size, ownership dispersion and official listing on the Stockholm Stock Exchange, but decreases with service & retail sector affiliation. To validate the results obtained for the firms' claimed disclosure strategies, analyst ratings of the firms' disclosure strategies were used. These were also collected by questionnaire. The analysis of analyst ratings yielded similar results. Overall, the findings are interpreted to suggest that asymmetric information and agency costs as well as capital market pressures to a great extent determine and explain a firm's choice of disclosure strategy. The second essay investigates the influence of two distinct disclosure strategies, proactive and reactive, on voluntary annual report disclosures by small listed Swedish firms. The findings reveal that, after controlling for factors that may vary with voluntary annual report disclosure level, the proactive disclosure strategy, compared to the reactive disclosure strategy, has a primary influence on strategic information and on stock price information, a secondary influence on financial information, but no influence on social information. The third essay examines whether and how international capital market pressures influence voluntary disclosure decisions by Swedish manufacturing MNEs in the context of the annual report. The results show that, after controlling for size and two important dimensions of the multifaceted concept of multinationality, international capital market pressures significantly influence the extent of strategic annual report disclosure and in particular strategic segmental disclosures. The fourth essay examines the effect of disclosure strategy on analysts' decisions to follow a firm and the characteristics of analysts' earnings forecasts. The findings show that, after controlling for important factors in a firm's information environment, firms with a more active and informative disclosure strategy are followed by a larger pool of analysts and have lower forecast dispersion. The findings also show a positive but insignificant effect of disclosure strategy on forecast accuracy. Further, no empirical evidence of systematic optimism or pessimism in analyst forecasts is found, but there is a tendency among analysts to overreact to information from firms with a more active and informative disclosure strategy.
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