Exploring Voluntary Disclosure of Gift Card Breakage: Insights From Agency and Signaling Theory

This study investigates the voluntary disclosure of gift card breakage among retail and restaurant firms, examining whether agency and signaling theories explain such disclosures and identifying firm-specific characteristics that influence the likelihood of disclosure. Using data from 79 U.S. publicly traded firms over 2013-2022, the study employs two-sample t-tests, difference-in-differences models, and logistic regression to analyze the impact of financial metrics on disclosure decisions. Firms with lower liquidity and weaker turnover management are more likely to disclose gift card breakage, supporting agency theory by suggesting that these disclosures reduce information asymmetry. The results also present a nuanced view of signaling theory, where disclosure might function as a "bad news" signal for firms with weaker financial health. The study also highlights the significant influence of ASC 606 adoption on disclosure practices, with firms being approximately 15 times more likely to disclose gift card breakage post-ASC 606. This research extends the corporate voluntary disclosure literature by focusing on the under-researched element of gift card breakage. The sector-specific focus highlights industry-specific nuances in voluntary disclosure practices.