Global Diversification and Corporate Disclosure

This paper examines whether a firm's level of voluntary disclosure varies with its level of global diversification. We argue that information asymmetries and agency costs arising from the global diversification of operations and financing increase the incentives for firms to disclose at a higher level. We measure global diversification of operations by factor-analyzing foreign shareholdings and foreign debt, and we measure global diversification of financing by factor-analyzing foreign sales and foreign subsidiaries. Using a sample of 216 firms from 17 countries selected from Fortune's Global 500 list and Botosan's (1997) disclosure index, we find that the level of voluntary disclosure is positively related to the extent of global operations, but is not related to the extent of global financing.