Abstract
Purpose - The specific purpose of our study is to understand how firm size and public/private affiliation (employment status) affect voluntary disclosure decisions concerning quantitatively immaterial nonfinancial information. Although the prior disclosure literature is large and has considered a variety of factors including size and to a lesser degree employment status, our study offers a new perspective by considering both factors in the context of qualitative materiality. Design/methodology/approach - We present 136 manager participants with 24 cues representing nonfinancial, realistic business events and solicit their disclosure judgments. The cues are adapted from Pinsker et al. (2009) and contain information that does not meet widely-accepted quantitative thresholds for disclosure (e.g., five percent of net income), yet were identified by the Securities and Exchange Commission (SEC) as more likely to be material. We use a median split of total assets and total revenues to determine "large" and "small" firms. Managers’ judgments are measured in an own-firm setting. (The context is their current employer, which can be public or private).Findings - We find that disclosure is positively linked to firm size, but we do not find an employer status effect. Additional testing reveals that private firm managers are sensitive to SEC oversight and other external, competitive pressures, suggesting that they face mimetic pressures to behave like their public firm counterparts. In sum, our findings contribute significantly to the disclosure, strategic management, institutional theory and judgment-and-decision-making (JDM) literatures.Research limitations/implications - We acknowledge some limitations of our study. First, the managers mainly came from large firms (both private and public); arguably, this biases against finding differences between the responses of public and private firm managers and limits our understanding of small firm managerial behavior. Second, we cannot rule out the possibility of hypothesis guessing. Practical implications - Our findings contribute to both the practitioner and academic literatures. First, regulators and capital providers of both public and private firms may be interested in the significant firm size finding in light of the non-significant current employer status results. Managers’ voluntary disclosure behavior from smaller firms has largely been inferred based on large firm research, despite the large number and importance of the smaller firms. A similar argument can be made regarding studies on private firm manager decision-making vis-à-vis their public firm counterparts.Originality/value - Although there is a vast literature on public firm managers’ voluntary disclosure behavior (mostly involving large firms), there is little research regarding the voluntary disclosure behavior of small or large private firm managers involving nonfinancial information. Consequently, we do not know much about how firm size or employer status (public or private firm) influence qualitative materiality judgments (i.e., the judgment to voluntarily disclose information deemed quantitatively immaterial).
Purpose - The specific purpose of our study is to understand how firm size and public/private affiliation (employment status) affect voluntary disclosure decisions concerning quantitatively immaterial nonfinancial information. Although the prior disclosure literature is large and has considered a variety of factors including size and to a lesser degree employment status, our study offers a new perspective by considering both factors in the context of qualitative materiality. Design/methodology/approach - We present 136 manager participants with 24 cues representing nonfinancial, realistic business events and solicit their disclosure judgments. The cues are adapted from Pinsker et al. (2009) and contain information that does not meet widely-accepted quantitative thresholds for disclosure (e.g., five percent of net income), yet were identified by the Securities and Exchange Commission (SEC) as more likely to be material. We use a median split of total assets and total revenues to determine "large" and "small" firms. Managers’ judgments are measured in an own-firm setting. (The context is their current employer, which can be public or private).Findings - We find that disclosure is positively linked to firm size, but we do not find an employer status effect. Additional testing reveals that private firm managers are sensitive to SEC oversight and other external, competitive pressures, suggesting that they face mimetic pressures to behave like their public firm counterparts. In sum, our findings contribute significantly to the disclosure, strategic management, institutional theory and judgment-and-decision-making (JDM) literatures.Research limitations/implications - We acknowledge some limitations of our study. First, the managers mainly came from large firms (both private and public); arguably, this biases against finding differences between the responses of public and private firm managers and limits our understanding of small firm managerial behavior. Second, we cannot rule out the possibility of hypothesis guessing. Practical implications - Our findings contribute to both the practitioner and academic literatures. First, regulators and capital providers of both public and private firms may be interested in the significant firm size finding in light of the non-significant current employer status results. Managers’ voluntary disclosure behavior from smaller firms has largely been inferred based on large firm research, despite the large number and importance of the smaller firms. A similar argument can be made regarding studies on private firm manager decision-making vis-à-vis their public firm counterparts.Originality/value - Although there is a vast literature on public firm managers’ voluntary disclosure behavior (mostly involving large firms), there is little research regarding the voluntary disclosure behavior of small or large private firm managers involving nonfinancial information. Consequently, we do not know much about how firm size or employer status (public or private firm) influence qualitative materiality judgments (i.e., the judgment to voluntarily disclose information deemed quantitatively immaterial).
