This paper discusses some existing and potential roles of financial reporting disclosures. The focus is on what are conventionally termed mandatory disclosures, although as Sunder (1997) points out the distinction between mandatory and voluntary is somewhat arbitrary. The paper views disclosure through the lens of incentives. Accounting disclosures are a component of the broad set of information shareholders, debt holders, and other accountees have to assess the stewardship of accountors. Valuation and stewardship are inherently interwoven. One needs to assess stewardship to value the firm, and value creation is a natural focus of stewardship assessment when shareholders are making the assessment. The purpose of the paper is to highlight considerations potentially deserving of additional attention by regulators and accounting researchers, not to advocate a particular position.

What are the comparative advantages of accounting disclosures over non-accounting sources of information? Should accounting disclosures be a complement to or substitute...

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