Beyond earnings quality: evaluating the quality of corporate disclosure practices

Abstract

We propose a framework to assess the decision-usefulness of heterogeneous disclosure practices that managers use to convey information to market participants. We illustrate an application of our framework to non-GAAP earnings, management earnings guidance, and earnings conference calls. We first identify key quality attributes for each disclosure practice and then develop a list of quality metrics that we apply to a small pilot sample. We focus on metrics that are easily measured in real time and discuss the practical challenges of conducting assessments of disclosure quality at the firm-quarter-disclosure level. Our descriptive analysis provides preliminary insights into whether and how voluntary disclosure quality varies across firms and highlights the interconnectedness of these disclosure practices. We discuss future research opportunities to expand and fine-tune the application of the framework to develop a comprehensive disclosure quality assessment.