Investors are eager for relevant and important information on firms. To meet these needs, managers sometimes voluntarily disclose information in addition to the financial information mandatorily required by the regulators. For example, on January 30, 2013, Nintendo, the world’s leading gaming company, warned investors by predicting a loss for the fiscal year ending March 2013. It also lowered its sales forecast for its product, Wii U. As an investor, you would wonder where you can find such information, whether you can trust the information disclosed by managers, and how best you can use that information.
Although a vast amount of information is available on the Internet, managers, as insiders, possess the most valuable information on the firms. However, it is at the managers’ discretion whether or not they disclose such information to the investors. Managers usually make voluntary disclosures with a purpose. Why do they disclose information? Why do they remain silent on certain questions you ask during a conference call? Unlike the information mandatorily disclosed by firms under the regulatory requirement, the quantity as well as quality of additional disclosures can be affected by various considerations such as peer competition, reputation of firms, and managers’ personal interests.
As an investor, you want to have access to more information; however, you do not want to be misled by biased information. To avoid being misled, it is important that you understand the motivations of managers that prompt them to make voluntary disclosures and the factors affecting the quality of such disclosures. As an intelligent investor, you need to come back to these three questions:
- Where can I find such information?
- Can I trust what the managers say?
- How can I best use the information?
How well-equipped are you to analyze voluntary disclosures and the motivations of managers resulting in biased disclosures? By explaining the regulatory environment, its format, the types of voluntary disclosures, and the incentives behind them, the Accenture Academy course Analyzing Voluntary Disclosures provides the insights and fundamentals to help you answer these three questions.