Corporate form and proprietary costs of voluntary disclosure
Single-segment (focused) firms have a natural disadvantage compared to multi segment (diversified) with respect to voluntary disclosure policy. Since aggregate disclosures by focused firms are at a finer level of detail than those of diversified firms, the latter have greater ability to react to focused firm information and there fore have a competitive advantage. I provide evidence that focused firms are less likely to provide earnings forecasts even after controlling for typical determinants of forecast issuance including various controls for proprietary costs. This result is the first to show that corporate form is an additional determinant of voluntary disclosure. Additionally, I provide support for the hypothesis that proprietary costs are negatively associated with voluntary disclosure. Tests showing that disclosure rank ing is not related to excess value are inconsistent with the alternative explanation that diversified firms reap greater benefits of disclosure. However, tests considering the potential obfuscation of disclosure by focused firms using additional measures of voluntary disclosures (forecast lead time, specificity, and error) are inconclusive.