The effect of voluntary disclosure, ownership structure and proprietary cost on the return–future earnings relation

This study examines the effect of voluntary disclosure on the relation between current annual return, contemporaneous annual earnings and future earnings, and the influence of both ownership structure and proprietary cost on this relation. Regression analyses reveal that firms with higher voluntary disclosure levels contain more information about future performance in their current stock return. This positive association is weaker if (1) management holds a higher proportion of share ownership in the company, (2) proprietary cost is present and (3) government ownership exists. However, the existence of outside block ownership significantly decreases managers' ability to limit voluntary disclosure. Our findings remain significant after controlling for the usual factors (size, growth, etc.) in the return–earnings regression, and a series of sensitivity and robustness checks.