EFFECT OF THE DISCLOSURE OF PROVISIONS AND CONTINGENT LIABILITIES ON MARKET PERFORMANCE OF COMPANIES LISTED ON B3

Abstract

Provisions and contingent liabilities are complex items whose classification and/or erroneous measurement may compromise the investor’s decision-making, if the information does not faithfully represent the reality of the company. In this sense, the research aimed to investigate the effect of provision and contingent liabilities disclosure on market performance of public traded companies. For this purpose, 660 observations from 220 companies listed on B3 (Brasil, Bolsa, Balcão - Brazil Stock Exchange) were analyzed, which disclosed information related to the provisions and contingent liabilities in the Explanatory Notes, in the period from 2015 to 2017. For data treatment, econometric models were estimated using Generalized Least Squares for panel data and Ordinary Least Squares with robust coefficients and standard errors for heteroscedasticity. Additionally, the multiple correspondence analysis technique was used. The results of the study confirm the influence of the disclosure of provisions and contingent liabilities on the market performance of B3 companies. Based on the Disclosure Theory, the research supports the importance of disclosing information, since it may be able to change the perception of different stakeholders in order to affect the market performance of companies listed on B3. The research contributes by exploring how litigation disclosure can impact investor decisions. In addition, it contributes to broadening the discussion on the disclosure of provisions and contingent liabilities in a developing market, where it is important to verify how the disclosure of litigation figures in this context.