The Relationship between Voluntary Disclosure, External Financing and Financial Status

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Abstract

Using unique Swedish disclosure data from 2007 to 2012, this paper reports three important sets of findings with regard to the relationship between firms' voluntary disclosure, external financing and financial status. First, financially strong firms disclose more than weaker ones. Second, firms that obtain new financing (equity or debt) disclose more than firms that do not. Third, the association between voluntary disclosure and financing events is stronger in financially weak firms. This last finding is new in the literature. Perhaps financially weak firms that obtain external funding have higher disclosure to counteract contracting and valuation problems in the financial markets.

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Subject classification (UKÄ) – MANDATORY

  • Business Administration

Keywords

  • voluntary disclosure, financial status, external financing, equity, issuance, debt overhang
Original languageEnglish
Pages (from-to)860-884
JournalJournal of Business Finance & Accounting
Volume42
Issue number7-8
Publication statusPublished - 2015
Publication categoryResearch
Peer-reviewedYes