Disclosure vs. disclosure ratings: Quantitative disclosure characteristics and analysts' ratings of disclosure quality

This paper documents significant associations between the disclosure ratings by analysts (produced by the Association of Investment Management and Research) and publicly accessible and quantifiable disclosure characteristics. These characteristics include disclosure quantity and disclosure timeliness. Results show that firms with longerBusiness and MD&A sections in annual reports, and firms that file timely reports, receive higher annual report scores. The results are robust after controlling for factors that may affect unobservable disclosure quality such as firm fundamentals, earnings attributes, and company popularity among analysts. This paper further attempts to predict the AIMR ratings by using only quantifiable disclosure data. At a reasonable accuracy rate, the quantity-based predictions reach conclusions consistent with the AIMR scores. This paper shows that the AIMR scores capture certain disclosure characteristics that are publicly identifiable. Furthermore, the results suggest the plausibility of using quantitative disclosure attributes as a proxy for disclosure quality on a large scale