UK Accounting Disclosure Practices and Information Asymmetry During the First Quarter of the Twentieth Century: The Effects on Book Returns and Dividend Cover

During the first quarter of the twentieth century there was marked information asymmetry as between senior managers and shareholders. The differences in information provision can be dichotomised into 'volume' and 'distortion' effects. This paper measures the (matched pair) differences between two standard measures of corporate performance, returns on equity capital and equity dividend cover, based on internal and then published data, in each case derived from a broadly-based set of quoted companies in UK industrial sectors. The results suggest that levels of information distortion were low until 1914, and material and much higher, after rather than during the First World War.