Voluntary disclosure and earnings management: Evidence from the Brazilian capital market

Silvia Consoni, Romualdo Douglas Colauto, Gerlando Augusto Sampaio Franco De Lima

Research output: Contribution to journalArticlepeer-review


This study examines the association between the voluntary disclosure of economic and financial information and earnings management. The outlined arguments on the subject are based on the assumption that consistent voluntary disclosure policies may reduce earnings management. The analysis is conducted on a random sample of 66 non-financial Brazilian listed companies in the 2005-2012 period. To measure voluntary disclosure, the index proposed by Consoni and Colauto (2016) is used. As a proxy for earnings management, discretionary accruals (DA) are estimated based on the model by Dechow, Sloan, and Sweeney (1995). The relationship between these measurements is analyzed using a model of simultaneous equations and by the random effects regression method with panel data. A significant negative relationship was expected a priori; however, the main result of the study indicates that voluntary disclosure and earnings management are not simultaneously determined or associated. Although the results obtained contradict certain theoretical assumptions, there are alternative explanations for this finding. The empirical set of evidence in this research, in addition to those in previous studies, should be interpreted with caution because there is no consensus on the measures for voluntary disclosure and earnings management. Second, several companies in Brazil may not be interested in providing high-quality voluntary disclosure because most of their shareholders enjoy private benefits of control. This issue reduces the importance of the potential market demand for information, stratifies information asymmetry, and does not prevent earnings management.

Original languageEnglish (US)
Pages (from-to)249-263
Number of pages15
JournalRevista Contabilidade e Financas
Issue number74
StatePublished - May 1 2017
Externally publishedYes


  • Accounting information
  • Discretionary accruals
  • Earnings management
  • Emerging markets
  • Voluntary disclosure

ASJC Scopus subject areas

  • Accounting
  • Finance


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