Topic: Materiality Uncertainty and Corporate Disclosure


Speaker: He Jiapeng, The Chinese University of Hong Kong


Time: November 8, 2024, 10:00

Venue: EMS 210

Abstract: This study examines how heightened uncertainty in materiality judgments affects mandatory disclosure of material information, by using a Supreme Court ruling (Matrixx Initiatives, Inc. v. Siracusano) that rejected the use of bright-line rules previously relied upon in some U.S. circuit courts to evaluate materiality claims. Using a difference-in-differences approach, we find that affected firms increase filings of materiality-based 8-K items following the ruling, relative to unaffected control firms, whereas there is no similar effect for nonmateriality-based 8-K items. The treatment effect strengthens when firms face higher litigation risk and when investors have more diverse opinions. The increased disclosures are primarily driven by filings containing relatively small amounts of information and by bad-news filings. These findings suggest that managers respond to heightened materiality uncertainty by making more conservative materiality judgments and increase disclosure of mandated information, particularly when the materiality is unclear and the information is adverse.

Guest Bio: He Jiapeng is an Assistant Professor of Accounting at The Chinese University of Hong Kong, holding a Ph.D. in Accounting from the University of Texas at Dallas (UTD) and a Bachelor's degree in Accounting from Xiamen University. His research interests currently include government transparency, procurement, and regulation. He is supported by the Hong Kong Research Grants Council (RGC) in his research and has published papers in academic journals such as The Accounting Review. He was awarded the Best Paper Award in the Government and Nonprofit Section at the 2021 American Accounting Association Annual Meeting for his research paper.