Uniform Versus Discretionary Regimes in Reporting Information with Unverifiable Precision and a Coordination Role

Journal Article (Journal Article)

We examine uniform and discretionary regimes for reporting information about firm performance from the perspective of a standard setter, in a setting where the precision of reported information is difficult to verify and the reported information can help coordinate decisions by users of the information. The standard setter's task is to choose a reporting regime to maximize the expected decision value of reported information for all users at all firms. The uniform regime requires all firms to report using the same set of reporting methods regardless of the precision of their information, and the discretionary regime allows firms to freely condition their sets of reporting methods on the precision of their information. We show that when unverifiable information precision varies across firms and users' decisions based on reported information have strong strategic complementarities, a uniform regime can have a beneficial social effect as compared to a discretionary reporting regime. Our analysis generates both normative and positive implications for evaluating the necessity and effectiveness of reporting under standards.

Full Text

Duke Authors

Cited Authors

  • Chen, Q; Lewis, TR; Schipper, K; Zhang, Y

Published Date

  • March 1, 2017

Published In

Volume / Issue

  • 55 / 1

Start / End Page

  • 153 - 196

Electronic International Standard Serial Number (EISSN)

  • 1475-679X

International Standard Serial Number (ISSN)

  • 0021-8456

Digital Object Identifier (DOI)

  • 10.1111/1475-679X.12130

Citation Source

  • Scopus