The economic consequences of fair value disclosures: a manifestation of the buried facts doctrine

Assaf Bar-Hod, Ester Chen, Ilanit Gavious

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


There is an ongoing debate about the need for improved intelligibility of corporate information. In particular, there is widespread dissatisfaction with the length and understandability of the information provided in firms’ financial statements. This paper investigates the determinants and effectiveness of corporate disclosures. To identify variation in the quantity and quality of corporate disclosures, we use fair-value-related disclosures as our setting. We create a firm-year-specific disclosure index to evaluate the quantity of fair-value-related information the firms convey. The quality of the information is measured via its ex ante ability to mitigate investors’ uncertainty about the estimated fair values. Our results suggest that managers regard quantity and quality as complementary features of corporate disclosures. Nevertheless, the evidence reveals that, for investors, this is not the case. Rather, large quantities of information appear to overload investors, thereby obscuring high-quality disclosures. Moreover, neither the value relevance, nor the informativeness, of the fair-valued items increase with the amount of related disclosures provided. Overall, we document the detrimental effect of information overload in burying facts critically important to investors and diminishing investor reliance on financial statements as a source of information for decision making.

Original languageEnglish
Pages (from-to)1363-1413
Number of pages51
JournalAccounting and Finance
Issue numberS1
StatePublished - 1 Apr 2021


  • Disclosure
  • Fair value accounting
  • Information overload


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