Abstract The article is a reply to a comment by the researchers Michael L. Moore and Stephen Buzby on the author's work, published in the July 1, 1972 issue of the journal "The Accounting Review." According to the authors, Moore and Buzby have made several comments on the index of disclosure, which was used in the authors' research to measure the quality of disclosure in annual reports. To test the effectiveness of their index, the authors compared their results with those of the twenty-sixth annual survey by "Financial World." Moore and Buzby noted that the test is somewhat misleading because "Financial World" only punishes the list of award winning companies and the failure of some of the companies in the bottom 23 percent of our sample to win an award may only mean that they were not among the reports surveyed. As mentioned in the authors' article, only 9 of the bottom 23 percent of their sample companies received merit certificates from "Financial World." One of the comments by Moore and Buzby deals with the index's inability to discriminate. This is not true since variable weights were used in scoring annual reports.

Abstract In a free enterprise system, variations in corporate disclosure practices are likely to result since corporations are managed by groups which have varying managerial philosophies and wide discretion in connection with disclosing information to the investing public. The quality of corporate disclosure influences to a great extent the quality of investment decisions made by investors. This study attempts to identify some of the characteristics of corporations in the U.S. which are associated with, and the probable implications of, the quality of corporate disclosure. Corporate disclosure of information can take several forms and the annual report to stockholders is a very important form of periodical corporate disclosure. This study demonstrates that the corporations which disclose inadequate information are likely to be small in size as measured by total assets, small in size as measured by number of stockholders, free from listing requirements, audited by a small accounting firm, less profitable as measured by rate of return, and less profitable as measured by earnings margin.