Effect of idiosyncratic shocks of dominant firms on voluntary disclosure by organizations
DOI:
https://doi.org/10.1590/1808-057x20252181.enKeywords:
voluntary disclosure, idiosyncratic shocks, dominant firms, linear hierarchical regressionsAbstract
The objective of this research was to analyze the effects of idiosyncratic shocks of dominant companies on the voluntary disclosure of other Brazilian publicly traded companies. Research involving macroeconomic understanding typically discusses items such as GDP or sector indices to explain variables at the firm level. Including idiosyncratic shocks in our analysis brings us closer to understanding the factors involved in the voluntary disclosure process based on mimetic isomorphism or informational asymmetry. Evidence suggests that large companies generate values, or shocks, capable of spreading throughout the economy and to other companies. Additionally, companies communicate with the market through voluntary disclosure, which may have endogenous and exogenous sources depending on its nature. The results indicate an inverse relationship between idiosyncratic shocks and voluntary disclosure; that is, shocks from dominant companies can provide information to the market and create a favorable environment for other companies. Non-dominant organizations would not need to disclose all voluntary information to their stakeholders. To study voluntary disclosure (dependent variable), a search was conducted in the Reference Form and other documents of Brazilian publicly traded companies, and an index was constructed using software. More than 169,000 excerpts from 5,752 documents were coded. The independent variable of the study was a proxy for the idiosyncratic shocks of large companies. The database contained 2,327 observations. Hierarchical linear regressions (HLM) were chosen for the quantitative analysis using a longitudinal sample from 2011 to 2023. The findings help investors, creditors, and users of accounting information to recognize that voluntarily disclosed information comes partly from external sources. The findings also confirm Leuz and Verrecchia’s (2000) idea to conduct association-based research to explain the exogenous sources of voluntary disclosure.
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