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Abstract
Firms are not required to disclose immaterial information (i.e., information that would fail to change the mind of a current or prospective stakeholder). Nevertheless, regulators have recently called attention to high levels of immaterial disclosure in firms annual reports, and express concern that such disclosure makes it difficult for investors to identify and respond to information that is relevant for their decision-making. I examine the determinants of quantitative immaterial disclosure in annual reports and provide evidence that the level of immaterial disclosure is associated with periods of macroeconomic uncertainty and related regulatory changes; firm-level litigation risk; and manager-level risk-aversion. Furthermore, I do not find evidence that managers disclose immaterial information when they have greater incentive to obfuscate (i.e., when earnings quality is low). Finally, I find some evidence that immaterial disclosure is associated with negative capital market consequences, such as higher stock return volatility and bid-ask spread. This evidence provides some support for regulators concerns that high levels of immaterial disclosure are difficult for investors to process. Overall, these results imply that regulators might be able to reduce immaterial disclosure by (1) reducing one-size-fits-all disclosure regulations, and (2) providing more legal (i.e., safe harbor) protection for firms and managers as they make decisions about disclosure materiality.