Does disclosure of non-financial statement information reduce firms' propensity to under-invest?

摘要

In the presence of information asymmetry, Myers and Majluf (1984) and Greenwald, Stiglitz, and Weiss (1984) demonstrate that a firm may pass up positive net present value (NPV) projects due to adverse selection in the equity market. The same model can be applied analogously in the debt market (Myers and Majluf, 1984). This study presents an empirical examination of whether disclosure of non-financial statement (NFS) information mitigates the under-investment problem, presumably by reducing information asymmetry between managers and potential stakeholders.;Because NFS disclosures are typically not comparable across industries, this study focuses on one industry: the electronic equipment industry. The sample includes a balanced panel of 222 firms for the period from 2001 to 2003. The proxy for NFS disclosures is hand-collected from the sample firms' 2001 annual reports and the proxy for under-investment is the cross-sectional variation in firms' investment level for years 2002 and 2003.;I present three findings. First, I document that managers who provide more NFS information are less likely to under-invest. Second, by classifying NFS disclosures into those that are more relevant to equity holders and those more relevant to debt holders, I find that both types of disclosures are negatively associated with the degree of under-investment. Last, I provide evidence that both equity- and debt-related NFS disclosures are positively associated with the level of subsequent equity financing. These results hold after I use a two-stage least squares (2SLS) specification to control for the endogeneity between investment and disclosure and that between equity financing and disclosure. (Full text of this dissertation may be available via the University of Florida Libraries web site. Please check http://www.uflib.ufl.edu/etd.html)