Corporate Financial Disclosure Measurement in the Empirical Accounting Literature: A Review Article

This paper develops a framework for corporate financial disclosure measurement to identify and evaluate common measures of financial disclosure employed in prior empirical accounting studies. It identifies two approaches: (i) a disclosure-based approach that investigates actual disclosure, operationalizes the concept of disclosure in terms of its main dimensions such as the quantity and quality of disclosure, and develops methods to measure them such as the disclosure index and textual analysis, and (ii) a non-disclosure-based approach that uses the values of some observable variables to proxy for disclosure such as market-based disclosure measures. The study also discusses some empirical challenges related to causal claims and the extent to which the reliability and validity of these different measures of disclosure are tested. The purposes of this review are (i) to help future researchers identify exemplars and select or develop their own suitable disclosure measures, and (ii) to identify measurement issues relating to corporate financial disclosure and provide avenues for future research.