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The investment opportunity set and disclosure policy choice: Some Malaysian evidence

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Abstract

Recently researchers have shown that certain corporate and accounting policy decisions are related to the firm's portfolio of growth opportunities or its investment opportunity set (ios). This paper augments the research by examining whether the firm's ios is also predictably related to disclosure policy decisions made by the firm. We hypothesize that because agency costs between managers and shareholders are an increasing function of the firm's growth opportunities, managers in high growth firms will be motivated to disclose information about the firm's future prospects in order to commit themselves to particular courses of action and thereby limit their future managerial discretion. Our empirical results indicate that for a sample of 67 Malaysian firms, this is supported only amongst a sample of lower growth firms.

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Authors
  1. Steven F. Cahan
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  2. Mahmud Hossain
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Additional information

The authors are Associate Professor and lecturer, respectively, at the Department of Accountancy, Massey University, Palmerston North, New Zealand. Correspondence should be addressed to S F Cahan at the above address, e-mail: S.F.Cahan@massey.ac.nz.

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Cahan, S.F., Hossain, M. The investment opportunity set and disclosure policy choice: Some Malaysian evidence. Asia Pacific J Manage 13, 65–85 (1996). https://doi.org/10.1007/BF01739682

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