A New Measure of Disclosure Quality: The Level of Disaggregation of Accounting Data in Annual Reports

Shuping Chen, Bin Miao, Terry Shevlin

Research output: Journal article publicationJournal articleAcademic researchpeer-review

131 Citations (Scopus)


We construct a new, parsimonious, measure of disclosure quality-disaggregation quality (DQ)-and offer validation tests. DQ captures the level of disaggregation of accounting data through a count of nonmissing Compustat line items, and reflects the extent of details in firms' annual reports. Conceptually, DQ differs from existing disclosure measures in that it captures the "fineness" of data and is based on a comprehensive set of accounting line items in annual reports. Unlike existing measures, which are usually applicable for a subset of firms or are based on a subset of information items, DQ can be generated for the universe of Compustat industrial firms. We conduct three sets of validation tests by examining DQ's association with variables predicted by prior literature to be associated with information quality. DQ is negatively (positively) associated with analyst forecast dispersion (accuracy) and negatively associated with bid-ask spreads and cost of equity. These associations continue to hold after we control for firm fundamentals. Taken together, results from this battery of validation tests are consistent with our measure capturing disclosure quality.
Original languageEnglish
Pages (from-to)1017-1054
Number of pages38
JournalJournal of Accounting Research
Issue number5
Publication statusPublished - 1 Dec 2015
Externally publishedYes


  • Annual reports
  • Compustat
  • Disaggregation of data items
  • Disclosure quality

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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