Purpose – This paper aims to explore the potential for disclosure
recommendations given by authoritative supervisory bodies to reduce
information asymmetry between the management and shareholders.

Design/methodology/approach – There is only meager existing evidence
concerning firms’ responses to disclosure recommendations. This paper
uses descriptive statistics and OLS regression analysis to test if firms
behave more similarly to voluntary or to mandatory disclosure when they
follow the Committee of European Securities Regulators disclosure
recommendation for International Financial Reporting Standards
transition. Second, it analyses the determinants of and incentives for
recommended transition disclosure.

Findings – Recommended disclosure is documented to have more mandatory
characteristics than purely voluntary disclosure. Moreover, the certain
disclosure incentives for managers and corporate governance factors
prove to have an impact on recommended disclosure. Firm size, growth
prospects, and independent board members associate positively with
recommended disclosure whereas there is a negative relationship between
financial leverage and recommended disclosure. Research
limitations/implications – The paper does not provide evidence on the
cost differences between disclosure laws and authoritative disclosure
recommendations. This could be examined by future research.

Practical implications – Authoritative disclosure recommendations reduce
information asymmetry. In some cases they may be a faster and more
cost-efficient way to achieve disclosure enhancements than regulation.

Originality/value – This paper is the first to explore the efficiency of
authoritative disclosure recommendations in situations where urgent
disclosure improvements are needed. The results have implications for
regulatory bodies evaluating different strategies to reduce asymmetric
information in these situations.