ACC 680: Disclosure Theory

The aim of this course is to provide students with an insight into analytical disclosure theory, one important stream of literature in accounting research. The overview provides insights into what shapes firms’ reporting decisions.

Learning outcomes
Students are able to assess and discuss the setting, basic assumptions, and mechanisms of disclosure models. Furthermore, they are able to formulate and defend constructive criticism of disclosure models.

Necessary prerequisites
ACC 5XX, not taken ACC 675

Recommended prerequisites
Basic knowledge in game theory, preparation of provided literature

Contact hoursIndependent study time
Lecture2 SWS9 SWS
Exercise class1 SWS5 SWS
Form of assessmentWritten Report (50%), Presentation (50%)
Restricted Admissionno
Further information
Performing lecturer
Dr. Sebastian Kronenberger
Dr. Sebastian Kronenberger
OfferingSpring semester
Duration of module 1 semester
Range of applicationM.Sc. MMM, M.Sc. Bus. Edu., M.Sc. Econ., M.Sc. Bus. Inf., LL.M.
Preliminary course work
Program-specific Competency GoalsCG 2, CG 4
Graded yes
LiteratureThis course covers both some seminal and current papers in the disclosure theory area.
They include but not limited to:
Akerlof, G.A. (1970): The market for ‘lemons’: quality uncertainty and the market mechanism, QJoE, 84, pp. 488 – 500
Beyer, A. et al. (2010): The financial reporting environment: Review of the recent literature, Journal of Accounting and Economics, 50, pp. 296 – 343
Ebert, M., Simons, D., and Stecher, J. D. (2017). Discretionary aggregation. The ac- counting review, 92(1):73–91.
Grossman, S.J, Hart, O. (1980): Disclosure laws and takeover bids, JoF, 35, pp. 323–334
Jung, W.O., Kwon, Y.K. (1988): Disclosure when the market is unsure of information endowment of managers, JoAR, 26, pp. 146–153
Verrecchia, R. E. (1983). Discretionary disclosure. JoAE, 5, 179–194.
Course outlineThe information asymmetry between investors and firms could cause a market collapse. Thus, disclosure is in the firm’s best interest. This course consists of three major parts. In the first part we introduce the unraveling principle that can be considered as the starting point of disclosure theory. In the second part we consider papers that relax certain assumptions underlying the revelation principle. This means we consider conditions under which a full disclosure equilibrium, i.e., settings where every firm discloses, is replaced by a partial disclosure equilibrium, i.e., settings where subsets of firm disclose. In the third part we consider papers with more descriptive contexts and their implications for real-world disclosure.