Voluntary disclosure is the provision of information by a company's

management Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Management includes the activitie ...

beyond requirements such as

generally accepted accounting principles Publicly traded companies typically are subject to rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on th ...

and

Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...

rules,FASB, 2001
Improving Business Reporting: Insights into Enhancing Voluntary Disclosures
Retrieved on April 20, 2012.Meek G. K., Roberts C. B., Gray S. J., 1995. Factors Influencing Voluntary Annual Disclosures By U.S., U.K., and Continental European Multinational Corporations. ''Journal of International Business Studies'' 26(3), 555-572. where the information is believed to be relevant to the decision-making of users of the company's

annual reports An annual report is a comprehensive report on a company's activities throughout the preceding year. Annual reports are intended to give shareholders and other interested people information about the company's activities and financial performance. ...

. Voluntary disclosure is carried out by many companies, although the extent and type of voluntary disclosure differs by geographic region, industry, and company size. The extent of voluntary disclosure is also affected by the firm's

corporate governance Corporate governance is defined, described or delineated in diverse ways, depending on the writer's purpose. Writers focused on a disciplinary interest or context (such as accounting, finance, law, or management) often adopt narrow definitions ...

structureEng L.L. & Mak Y.T., 2003. Corporate governance and voluntary disclosure. ''Journal of Accounting and Public Policy'' 22 (2003), 325-345. and ownership structure; in particular, research has found that top executives have a significant influence on their firms' voluntary disclosures, and that managers have unique disclosure styles related to their personal backgrounds including their

career The career is an individual's metaphorical "journey" through learning, work and other aspects of life. There are a number of ways to define career and the term is used in a variety of ways. Definitions The ''Oxford English Dictionary'' defi ...

paths and

military A military, also known collectively as armed forces, is a heavily armed, highly organized force primarily intended for warfare. It is typically authorized and maintained by a sovereign state, with its members identifiable by their distinct ...

experience.Bamber, Linda Smith, John (Xuefeng) Jiang, and Isabel Yanyan Wang. 2010. “What’s My Style? The Influence of Top Managers on Voluntary Corporate Financial Disclosure.” ''The Accounting Review'' 85 (4). Voluntary disclosure has also been identified as an important area in financial reporting research.Ho, Simon S.M, and Kar Shun Wong. 2001. “A Study of the Relationship Between Corporate Governance Structures and the Extent of Voluntary Disclosure.” ''Journal of International Accounting, Auditing and Taxation'' 10 (2) (June): 139–156. There are links between firm choices to voluntarily disclose certain information and what they are required to disclose via mandatory disclosures.

Overview and practices

Costs and benefits

Voluntary disclosure benefits

investors An investor is a person who allocates financial capital with the expectation of a future return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Type ...

, companies and the

economy An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with th ...

; for example, it helps investors make better capital allocation decisions and lowers firms'

cost of capital In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". It is used to evaluate ne ...

, the latter of which also benefits the general economy. It may also reduce

conflicts of interest A conflict of interest (COI) is a situation in which a person or organization is involved in multiple wikt:interest#Noun, interests, finance, financial or otherwise, and serving one interest could involve working against another. Typically, t ...

in widely held firms.Chau G.K. & Gray S.J., 2002. Ownership structure and corporate voluntary disclosure in Hong Kong and Singapore. ''The International Journal of Accounting'' 37 (2002), 247-265. Voluntary disclosure is also affected by

shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal o ...

demands; for example 60 percent of the companies on the

S&P 100 The S&P 100 Index is a stock market index of United States stocks maintained by Standard & Poor's. Index options on the S&P 100 are traded with the ticker symbol "OEX". Because of the popularity of these options, investors often refer to the ind ...

adopted voluntary disclosure policies in response to shareholder demand for information on corporate political spending. Firms, however, balance the benefits of voluntary disclosure against the costs, which may include the cost of procuring the information to be disclosed, and decreased

competitive advantage In business, a competitive advantage is an attribute that allows an organization to outperform its competitors. A competitive advantage may include access to natural resources, such as high-grade ores or a low-cost power source, highly skilled ...

Regulatory and academic opinion

Types and examples

Voluntary disclosures can include strategic information such as company characteristics and strategy, nonfinancial information such

socially responsible Social responsibility is an ethical framework in which an individual is obligated to work and cooperate with other individuals and organizations for the benefit of the community that will inherit the world that individual leaves behind. Social ...

practices, and financial information such as stock price information. The

Financial Accounting Standards Board The Financial Accounting Standards Board (FASB) is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public's interest. The Securi ...

classified voluntary disclosures into the six categories below, while Meek, Roberts and Gray (1995) classified them into three major groups: strategic, nonfinancial and financial information. ;Business data:For example, a breakdown of

market share Market share is the percentage of the total revenue or sales in a market that a company's business makes up. For example, if there are 50,000 units sold per year in a given industry, a company whose sales were 5,000 of those units would have a ...

growth and information on new products. ;Analysis of business data:For example, trend analyses and comparisons with competitors. ;Forward-looking information:For example, sales forecast breakdowns and plans for expansion. ;Information about management and shareholders:For example, information on

stockholders A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal own ...

and

creditors A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property ...

, and shareholding breakdowns. ;Company background:For example, product descriptions and long-term objectives. ;Information about intangible assets:For example,

research and development Research and development (R&D or R+D), known in Europe as research and technological development (RTD), is the set of innovative activities undertaken by corporations or governments in developing new services or products, and improving existi ...

and

customer relations Customer relationship management (CRM) is a process in which a business or other organization administers its interactions with customers, typically using data analysis to study large amounts of information. CRM systems compile data from a ra ...

. Intellectual Capital Disclosures are prevalent among many knowledge-based companies and are used to help stakeholders understand how an organization uses its knowledge, skills, relationships, and processes to create value.{{Cite journal, last=Jan Mouritsen, last2=Per Nikolaj Bukh, last3=Bernard Marr, date=2004-03-01, title=Reporting on intellectual capital: why, what and how?, journal=Measuring Business Excellence, volume=8, issue=1, pages=46–54, doi=10.1108/13683040410524739, issn=1368-3047

References

Accounting research Accounting terminology