Materiality Uncertainty and Corporate Disclosure
Prof. Xiaolu ZHOU
Assistant Professor in Accounting
Chinese University of Hong Kong
Date: 22 April 2025 (Tuesday)
Time: 13:00-14:00
Venue: FBA Lobby
Abstract
This study examines how heightened uncertainty in materiality judgments affects mandatory disclosure of material information, by using a Supreme Court ruling (Matrixx Initiatives, Inc. v. Siracusano) that rejected the use of bright-line rules previously relied upon in some U.S. circuit courts to evaluate materiality claims. Using a difference-in-differences approach, we find that affected firms increase filings of materiality-based 8-K items following the ruling, relative to unaffected control firms, whereas there is no similar effect for nonmateriality-based 8-K items. The treatment effect strengthens when firms face higher litigation risk, managers are less overconfident, and investors have more diverse opinions. The increased disclosures are primarily driven by filings containing relatively small amounts of information and by bad-news filings. These findings suggest that managers respond to heightened materiality uncertainty by making more conservative materiality judgments and increase disclosure of mandated information, particularly when the materiality is unclear and the information is adverse.
Speaker
Prof. Xiaolu Zhou is an Assistant Professor of Accounting at The Chinese University of Hong Kong (CUHK). Prior to joining CUHK, she obtained her PhD degree in Accounting from University of Texas at Dallas, and her master’s and bachelor’s degrees in Finance from Fudan University. Her main research area is corporate disclosure and financial reporting. Her research has been published on accounting top journals including Journal of Accounting Research, The Accounting Review and Review of Accounting Studies. She is also a Chartered Financial Analyst (CFA) charterholder and a member of The Hong Kong Society of Financial Analyst.
All are welcome!
