Question

Explain the benefits and costs associated with a company's disclosure of information.

Answer 1

Disclosure means the act of releasing all information that is of relevance to the investors that might influence their decisions.

Disclosing all information about company polices, financial information, managers compensation profits, and positive or negative news. In the concept o fairness, all parties should have access to all information.

The benefits of financial disclosure is the increased trust of the investors in the company operations as a result the the number of investors towards a company increases. It shows transparency and improves trust.

the costs associated with disclosure is:

competitive disadvantage costs : Due to release of all financial information to the public, the company may suffer due to the fact that all information about the favourable products, the geographical locations, the information of the new products that the company wishes to launch the various advertising strategies is available fro the sue of competitors which might lead to the loss of competitive edge of the company.

Litigation costs : Due to the release of the information in a fair and unbiased manner. A section of the investors might believe that the previous information presented was false and misleading and might even want to file a suit against the company. In such cases , the company would need to pay the direct costs of lawyer fees, loss of reputation and the loss of time of the people of the managers of the company in preparing for the defense against the legal case filed.

There are also a lot of costs involve din the collection of data, processing the data and ultimately presenting the data to the public.