Voluntary Disclosure and Relational Connectivity – The Case of the Polish Bond Market

• Authors: Dominika Hadro , Marek Pauka , Kamil Gemra , Szymon Okoń , Justyna Fijałkowska

Abstracts

EN

The purpose of our research is to evaluate the voluntary disclosure strategy and effective communication between issuers and investors on the Polish bond market Catalyst. We conducted a questionnaire among issuers on the Catalyst. To evaluate the data and find answers to the research questions, we used the Qualitative Comparative Analysis. As our analysis shows that management board engagement seems crucial for effective communication, we claim that in relatively smaller capital markets, personal engagement of board members in preparing voluntary disclosure should be considered a proxy of a high disclosure strategy quality. We prove that companies use dialogue with investors in private rather than in public to understand their communication expectations. This finding indicates the essential limitations of previous research evaluating relational connectivity through social media. We point out the existence of many paths to achieve a high level of companies’ perception of investors’ voluntary disclosure needs and companies’ relational connectivity regarding voluntary disclosure. We developed a new approach to measuring relational connectivity, which can be successfully applied to other markets and stock exchanges, allowing verification of previous findings and the development of a new approach to conducting research. We claim that it is necessary to put more pressure on the management board’s engagement in preparing the financial report as it is crucial for understanding investors’ voluntary disclosure needs. Our conclusions question the growing societal pressure on engaging in activity in social media as a key concept of effective communication.

Keywords

EN

voluntary disclosure; relational connectivity; bond market; Poland; corporate; communication

• Publisher: Uniwersytet Warszawski. Wydział Nauk Ekonomicznych
• Journal: Journal of Banking and Financial Economics
• Year: 2022
• Issue: 2(18)
• Pages: 30-48

Dates

published

2022

Contributors

author

Dominika Hadro

• Wroclaw University of Economics and Business, Poland

• https://orcid.org/0000000179047685

author

Marek Pauka

• Wroclaw University of Economics and Business, Poland

• https://orcid.org/0000000181484438

author

Kamil Gemra

• Warsaw School of Economics, Poland

• https://orcid.org/0000000152922363

author

Szymon Okoń

• Warsaw School of Economics, Poland

• https://orcid.org/0000000172143981

author

Justyna Fijałkowska

• University of Lodz, Poland

• https://orcid.org/0000000242361491

References

• Ajinkya, B., Bhojraj, S., & Sengupta, P. (2005). The association between outside directors, institutional investors, and the properties of management earnings forecasts. Journal of Accounting Research, 43(3), 343–375. https://doi.org/10.1111/j.1475-679x.2005.00174.x
• Asay, H. S., Libby, R., & Rennekamp, K. M. (2018). Do features that associate managers with a message magnify investors’ reactions to narrative disclosures? Accounting, Organisations and Society, 68, 1–14. https://doi.org/10.1016/j.aos.2018.02.003
• Balakrishnan, K., Billings, M., Kelly, B., & Ljungqvist, A. (2014). Shaping liquidity: On the causal effects of voluntary disclosure. The Journal of Finance, 69, 2237–2278. https://doi.org/10.1111/jofi.12180
• Bamber, L. S., Jiang, J. (Xuefeng), & Wang, I. Y. (2010). What‘s my style? The influence of top managers on voluntary corporate financial disclosure. The Accounting Review, 85(4), 1131–1162. https://doi.org/10.2308/accr.2010.85.4.1131
• Bardos, K. S. (2011). Quality of financial information and liquidity. Review of Financial Economics, 20(2), 49–62. https://doi.org/10.1016/j.rfe.2011.01.001
• Barry, C. B., & Brown, S. J. (1985). Differential information and security market equilibrium. Journal of Financial and Quantitative Analysis, 20(4), 407–422. https://doi.org/10.2307/2330758
• Bebczuk, R. N. (2003). Asymmetric information in financial markets: Introduction and applications. Cambridge University Press.
• Benabou, R., & Tirole, J. (2002). Self-confidence and personal motivation. The Quarterly Journal of Economics, 117(3), 871–915. https://doi.org/10.1162/003355302760193913
• Beyer, A., Cohen, D. A., Lys, T. Z., & Walther, B. R. (2010). The financial reporting environment: Review of the recent literature. Journal of Accounting and Economics, 50(2), 296–343. https://doi.org/10.1016/j.jacceco.2010.10.003
• Beyer, A., & Guttman, I. (2012). Voluntary disclosure, manipulation, and real effects. Journal of Accounting Research, 50(5), 1141–1177. https://doi.org/10.1111/j.1475-679X.2012.00459.x
• Blankespoor, E. (2018). Firm communication and investor response: A framework and discussion integrating social media. Accounting, Organisations and Society, 68–69, 80–87. https://doi.org/10.1016/j.aos.2018.03.009
• Blankespoor, E., deHaan, E., & Marinovic, I. (2020). Disclosure processing costs, investors’ information choice, and equity market outcomes: A review. Journal of Accounting and Economics, 70(2/3), 101344. https://doi.org/10.1016/j.jacceco.2020.101344
• Blankespoor, E., Miller, G. S., & White, H. D. (2014). The role of dissemination in market liquidity: Evidence from firms’ use of Twitter. The Accounting Review, 89(1), 79–112. https://doi.org/10.2308/accr-50576
• Bochkay, K., Chychyla, R., & Nanda, D. (2019). Dynamics of CEO disclosure style. The Accounting Review, 94(4), 103–140. https://doi.org/10.2308/accr-52281
• Botosan, C. A. (1997). Disclosure level and the cost of equity capital. Accounting Review: A Quarterly Journal of the American Accounting Association, 72, 323–349.
• Brennan, N. M., & Merkl-Davies, D. M. (2018). Do firms effectively communicate with financial stakeholders? A conceptual model of corporate communication in a capital market context. Accounting and Business Research, 48(5), 553–577. https://doi.org/10.1080/00014788.2018.1470143
• Bryl, Ł., Fijałkowska, J., & Hadro, D. (2021). Intellectual capital disclosure on Twitter – Empirical evidence from the world’s largest companies. Meditari Accountancy Research. Advance online publication. https://doi.org/10.1108/MEDAR-02-2021-1211
• Cade, N. L. (2018). Corporate social media: How two-way disclosure channels influence investors. Accounting, Organizations and Society, 68, 63–79. https://doi.org/10.1016/j.aos.2018.03.004
• Charness, G., Rustichini, A., & van de Ven, J. (2018). Self-confidence and strategic behavior. Experimental Economics, 21(1), 72–98. https://doi.org/10.1007/s10683-017-9526-3
• Cheng, C.-F., Chang, M.-L., & Li, C.-S. (2013). Configural paths to successful product innovation. Journal of Business Research, 66(12), 2561–2573. https://doi.org/10.1016/j.jbusres.2012.10.006
• Cho, H., & Kim, R. (2021). Asymmetric effects of voluntary disclosure on stock liquidity: Evidence from 8-K filings. Accounting & Finance, 61(1), 803–846. https://doi.org/10.1111/acfi.12594
• Cuadrado-Ballesteros, B., Martínez-Ferrero, J., & García-Sánchez, I. M. (2017). Board structure to enhance social responsibility development: A qualitative comparative analysis of US companies. Corporate Social Responsibility and Environmental Management, 24(6), 524–542. https://doi.org/10.1002/csr.1425
• Cucari, N. (2019). Qualitative comparative analysis in corporate governance research: A systematic literature review of applications. Corporate Governance: The International Journal of Business in Society, 19(4). https://doi.org/10.1108/CG-04-2018-0161
• Diamond, D. W. (1985). Optimal release of information by firms. The Journal of Finance, 40, 1071–1094. https://doi.org/10.1111/j.1540-6261.1985.tb02364.x
• Diamond, D. W., & Verrecchia, R. E. (1991). Disclosure, liquidity, and the cost of capital. The Journal of Finance, 46(4), 1325–1359. https://doi.org/10.1111/j.1540-6261.1991.tb04620.x
• Richards, D. W., & Safari, M. (2021). Disclosure effectiveness in the financial planning industry. Qualitative Research in Financial Markets. Advance online publication. https://doi.org/10.1108/CG-04-2018-0161
• Drake, M. S., Thornock, J. R., & Twedt, B. J. (2017). The internet as an information intermediary. Review of Accounting Studies, 22(2), 543–576. https://doi.org/10.1007/s11142-017-9395-1
• Dyer, T., Lang, M., & Stice-Lawrence, L. (2017). The evolution of 10-K textual disclosure: Evidence from Latent Dirichlet Allocation. Journal of Accounting and Economics, 64(2/3), 221–245. https://doi.org/10.1016/j.jacceco.2017.07.002
• Easley, D., & O’Hara, M. (2004). Information and the cost of capital. The Journal of Finance, 59(4), 1553–1583. https://doi.org/10.1111/j.1540-6261.2004.00672.x
• Elliott, W. B., Grant, S. M., & Hodge, F. D. (2018). Negative news and investor trust: The role of $Firm and #CEO Twitter use. Journal of Accounting Research, 56(5), 1483–1519. https://doi.org/10.1111/1475-679X.12217
• Enache, L., & Hussainey, K. (2020). The substitutive relation between voluntary disclosure and corporate governance in their effects on firm performance. Review of Quantitative Finance and Accounting, 54(2), 413–445. https://doi.org/10.1007/s11156-019-00794-8
• Fainshmidt, S., Witt, M. A., Aguilera, R. V., & Verbeke, A. (2020). The contributions of qualitative comparative analysis (QCA) to international business research. Journal of International Business Studies, 51(4), 455–466. https://doi.org/10.1057/s41267-020-00313-1
• Farneti, F., Guthrie, J., & Canetto, M. (2019). Social reports of an Italian provincial government: A longitudinal analysis. Meditari Accountancy Research, 27(4), 580–612. https://doi.org/10.1108/MEDAR-11-2018-0397
• Fishman, M. J., & Hagerty, K. M. (2003). Mandatory versus voluntary disclosure in markets with informed and uninformed customers. The Journal of Law, Economics, and Organization, 19(1), 45–63. https://doi.org/10.1093/jleo/19.1.45
• Fiss, P. C. (2007). A set-theoretic approach to organisational configurations. Academy of Management Review, 32(4), 1180–1198. https://doi.org/10.5465/amr.2007.26586092
• Francis, J., Nanda, D., & Olsson, P. (2008). Voluntary disclosure, earnings quality, and cost of capital. Journal of Accounting Research, 46(1), 53–99. https://doi.org/10.1111/j.1475-679X.2008.00267.x
• Frandsen, F., & Johansen, W. (2018). Corporate communication. In R. L. Heath & W. Johansen (Eds.), The International Encyclopedia of Strategic Communication (pp. 1–10). John Wiley & Sons. https://doi.org/10.1002/9781119010722.iesc0048
• Freeman, R. E. (1984). Strategic management: A stakeholder approach. Pitman
• Garcia-Meca, E., & Sanchez-Ballesta, J. P. (2010). The association of board independence and ownership concentration with voluntary disclosure: A meta-analysis. European Accounting Review, 19(3), 603–627. https://doi.org/10.1080/09638180.2010.496979
• García Osma, B., & Grande-Herrera, C. (2021). The role of users’ engagement in shaping financial reporting: Should activists target accounting more? Accounting and Business Research, 51(5), 511–544. https://doi.org/10.1080/00014788.2021.1932261
• Glosten, L. R., & Milgrom, P. R. (1985). Bid, ask and transaction prices in a specialist market with heterogeneously informed traders. Journal of Financial Economics, 14(1), 71–100. https://doi.org/10.1016/0304-405X(85)90044-3
• Goldstein, I., & Yang, L. (2017). Information disclosure in financial markets. Annual Review of Financial Economics, 9, 101–125. https://doi.org/10.1146/annurev-financial-110716-032355
• Gómez-Carrasco, P., Guillamón-Saorín, E., & Osma, B. G. (2020). Stakeholders versus firm communication in social media: The case of Twitter and corporate social responsibility information. European Accounting Review, 30(1), 31–62. https://doi.org/10.1080/09638180.2019.1708428
• Gomez‐Carrasco, P., & Michelon, G. (2017). The power of stakeholders’ voice: The effects of social media activism on stock markets. Business Strategy and the Environment, 26(6), 855–872. https://doi.org/10.1002/bse.1973
• Greckhamer, T., Furnari, S., Fiss, P. C., & Aguilera, R. V. (2018). Studying configurations with qualitative comparative analysis: Best practices in strategy and organisation research. Strategic Organization, 16(4), 482–495. https://doi.org/10.1177/1476127018786487
• Grossman, S. J., & Hart, O. D. (1980). Disclosure laws and takeover bids. The Journal of Finance, 35(2), 323–334. https://doi.org/10.1111/j.1540-6261.1980.tb02161.x
• Grossman, S. J. (1981). The informational role of warranties and private disclosure about product quality. Journal of Law and Economics, 24, 461–483. https://doi.org/10.1086/466995
• Hadro, D., Fijałkowska, J., Daszyńska-Żygadło, K., Zumente, I., & Mjakuškina, S. (2022). What do stakeholders in the construction industry look for in non-financial disclosure and what do they get? Meditari Accountancy Research, 30(3), 762–785. https://doi.org/10.1108/MEDAR-11-2020-1093
• Hales, J., Moon, J. R., Jr. & Swenson, L. A. (2018). A new era of voluntary disclosure? Empirical evidence on how employee postings on social media relate to future corporate disclosures. Accounting, Organizations and Society, 68, 88–108. https://doi.org/10.1016/j.aos.2018.04.004
• Hamilton, E. L., & Winchel, J. (2019). Investors’ processing of financial communications: A persuasion perspective. Behavioral Research in Accounting, 31(1), 133–156. https://doi.org/10.2308/bria-52211
• Hassan, O. A. G., & Marston, C. (2019). Disclosure measurement in the empirical accounting literature - A review article. The International Journal of Accounting, 54(2), 1–54. https://doi.org/10.2139/ssrn.1640598
• Hayes, R. M., & Lundholm, R. (1996). Segment reporting to the capital market in the presence of a competitor. Journal of Accounting Research, 34(2), 261–279. https://doi.org/10.2307/2491502
• He, J., Plumlee, M. A., & Wen, H. (2019). Voluntary disclosure, mandatory disclosure and the cost of capital. Journal of Business Finance & Accounting, 46(3/4), 307–335. https://doi.org/10.1111/jbfa.12368
• Healy, P. M., Hutton, A. P., & Palepu, K. G. (1999). Stock performance and intermediation changes surrounding sustained increases in disclosure. Contemporary Accounting Research, 16(3), 485–520. https://doi.org/10.1111/j.1911-3846.1999.tb00592.x
• Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1/3), 405–440. https://doi.org/10.1016/S0165-4101(01)00018-0
• Hribar, P., & Yang, H. (2016). CEO overconfidence and management forecasting. Contemporary Accounting Research, 33(1), 204–227. https://doi.org/10.1111/1911-3846.12144
• Hughes, J. S., Liu, J., & Liu, J. (2007). Information asymmetry, diversification, and cost of capital. The Accounting Review, 82(3), 705–729. https://doi.org/10.2308/accr.2007.82.3.705
• Jung, M. J., Naughton, J. P., Tahoun, A., & Wang, C. (2017). Do firms strategically disseminate? Evidence from corporate use of social media. The Accounting Review, 93(4), 225–252. https://doi.org/10.2308/accr-51906
• Khlif, H., Ahmed, K., & Souissi, M. (2017). Ownership structure and voluntary disclosure: A synthesis of empirical studies. Australian Journal of Management, 42(3), 376–403. https://doi.org/10.1177/0312896216641475
• Kim, O., & Verrecchia, R. E. (1994). Market liquidity and volume around earnings announcements. Journal of Accounting and Economics, 17(1/2), 41–67. https://doi.org/10.1016/0165-4101(94)90004-3
• Krasodomska, J., & Zarzycka, E. (2020). Key performance indicators disclosure in the context of the EU directive: When does stakeholder pressure matter? Meditari Accountancy Research, 29(7), 1–30. https://doi.org/10.1108/MEDAR-05-2020-0876
• Lambert, R., Leuz, C., & Verrecchia, R. E. (2007). Accounting information, disclosure, and the cost of capital. Journal of Accounting Research, 45(2), 385–420. https://doi.org/10.1111/j.1475-679X.2007.00238.x
• Lawrence, A. (2013). Individual investors and financial disclosure. Journal of Accounting and Economics, 56(1), 130–147. https://doi.org/10.1016/j.jacceco.2013.05.001
• Lee, L. F., Hutton, A. P., & Shu, S. (2015). The role of social media in the capital market: Evidence from consumer product recalls. Journal of Accounting Research, 53(2), 367–404. https://doi.org/10.1111/1475-679X.12074
• Lev, B. (1992). Information disclosure strategy. California Management Review, 34(4), 9–32. https://doi.org/10.2307/41166701
• Manetti, G., & Bellucci, M. (2016). The use of social media for engaging stakeholders in sustainability reporting. Accounting, Auditing & Accountability Journal, 29(6), 985–1011.https://doi.org/10.1108/AAAJ-08-2014-1797
• Masiero, E., Arkhipova, D., Massaro, M., & Bagnoli, C. (2019). Corporate accountability and stakeholder connectivity. A case study. Meditari Accountancy Research, 28(5), 803–831.https://doi.org/10.1108/MEDAR-03-2019-0463
• Mastrangelo, L., Cruz-Ros, S., & Miquel-Romero, M.-J. (2019). Crowdfunding success: The role of co-creation, feedback, and corporate social responsibility. International Journal of Entrepreneurial Behavior & Research, 26(3), 449–466. https://doi.org/10.1108/IJEBR-06-2019-0391
• Milgrom, P. R. (1981). Good news and bad news: Representation theorems and applications. The Bell Journal of Economics, 380–391. https://doi.org/10.2307/3003562
• Miller, D. (2018). Challenging trends in configuration research: Where are the configurations? Strategic Organization, 16(4), 453–469. https://doi.org/10.1177/1476127017729315
• Ragin, C. C. (1987). The comparative method: Moving beyond qualitative and quantitative strategies. University of California Press.
• Ragin, C. C. (2007). Fuzzy sets: Calibration versus measurement. Methodology Volume of Oxford Handbooks of Political Science, 2.
• Rawls, J. (1971). A theory of justice. Harvard University Press. https://doi.org/10.4159/9780674042605
• Rihoux, B., & Ragin, C. C. (Eds.). (2008). Configurational comparative methods: Qualitative comparative analysis (QCA) and related techniques. SAGE Publications. https://doi.org/10.4135/9781452226569
• Schneider, C. Q., & Wagemann, C. (2012). Set-theoretic methods for the social sciences: A guide to qualitative comparative analysis. Cambridge University Press. https://doi.org/10.1017/CBO9781139004244
• Schoenfeld, J. (2017). The effect of voluntary disclosure on stock liquidity: New evidence from index funds. Journal of Accounting and Economics, 63, 51–74. https://doi.org/10.1016/j.jacceco.2016.10.007
• Sengupta, P. (1998). Corporate disclosure quality and the cost of debt. Accounting Review, 459–474.
• Seny Kan, A. K., Adegbite, E., El Omari, S., & Abdellatif, M. (2016). On the use of qualitative comparative analysis in management. Journal of Business Research, 69(4), 1458–1463. https://doi.org/10.1016/j.jbusres.2015.10.125
• She, C., & Michelon, G. (2019). Managing stakeholder perceptions: Organised hypocrisy in CSR disclosures on Facebook. Critical Perspectives on Accounting, 61, 54-76. https://doi.org/10.1016/j.cpa.2018.09.004
• Stiglitz, J. E. (1989). FINANCIAL MARKETS AND DEVELOPMENT. Oxford Review of Economic Policy, 5(4), 55–68. https://doi.org/10.1093/oxrep/5.4.55
• Twedt, B. (2015). Spreading the word: Price discovery and newswire dissemination of management earnings guidance. The Accounting Review, 91(1), 317–346. https://doi.org/10.2308/accr-51129
• Verrecchia, R. E. (1983). Discretionary disclosure. Journal of Accounting and Economics, 5, 179–194. https://doi. org/10.1016/0165-4101(83)90011-3
• Verrecchia, R. E. (1990). Information quality and discretionary disclosure. Journal of Accounting and Economics, 12(4), 365–380. https://doi.org/10.1016/0165-4101(90)90021-U
• Wagenhofer, A. (1990). Voluntary disclosure with a strategic opponent. Journal of Accounting and Economics, 12(4), 341–363. https://doi.org/10.1016/0165-4101(90)90020-5

Identifiers

DOI

10.7172/2353-6845.jbfe.2022.2.3

Biblioteka Nauki

2163459