++A Comparative Empirical Examination of Extent of Disclosure by Private and Public Colleges and Universities in The United States

Journal of Accounting and Public Policy 21 (2002) 235–275
www.elsevier.com/locate/jaccpubpol
A comparative empirical examination

of extent of disclosure by private
and public colleges and universities in
the United States
Teresa Gordon a, Mary Fischer b,*, David Malone c,
Greg Tower d
a
University of Idaho, USA
b
University of Texas at Tyler, College of Business Administration, 3900 University Boulevard,
Tyler, TX 75701, USA
c
Texas Tech University, USA
d
Murdoch University, Australia
Abstract
This study examines the annual reports of 100 United States (US) institutions of
higher education to determine identifiable and measurable factors associated with extent
of disclosure. Each disclosure was weighted by its relative importance to users of college
and university financial statements. The measurement construct for extent of disclosure
was the ratio of an institutionÕs total disclosure score to its total possible disclosure
score. Institution size and public/private status were associated with total extent of
disclosure but leverage and audit firm size were not significant. Extent of disclosure of
non-financial performance information (service efforts and accomplishments) was as-
sociated with high tuition rates and low dependence on tuition revenue and with state
auditors as opposed to public accounting firm auditors. The findings are consistent with
accountability and public interest tenets (Coy, D., Fischer, M., Gordon, T., 2001. Public
accountability: a new paradigm for college and university annual reports. Critical
Perspectives on Accounting 12 (1), 1–31). Highly visible institutions, those larger in size
*
Corresponding author. Tel.: +1-903-566-7433; fax: +1-903-566-7372.
E-mail address: mfischer@mail.uttyl.edu (M. Fischer).
0278-4254/02/$ - see front matter Ó 2002 Elsevier Science Inc. All rights reserved.
PII: S 0 2 7 8 - 4 2 5 4 ( 0 2 ) 0 0 0 5 1 - 0
236 T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235–275
or audited by the state, disclosed more information. Moreover, some institutions used a
corporate-style report to better promote their interests.
Ó 2002 Elsevier Science Inc. All rights reserved.
1. Introduction
The United States (US) has the worldÕs largest private sector of higher ed-
ucation comprising 55.2% of its 3561 colleges and universities. 1 Private and
public institutions in all categories compete for students, from prestigious re-
search institutions to liberal arts colleges to two-year community colleges.
Accountability by private non-profit colleges and universities entails unique
issues because these institutions are not subject to the electoral control which
holds government accountable and because they are often insulated from the
market forces that discipline business entities due to their (sometimes) extensive
endowments. Nevertheless, US colleges and universities of all types are faced
with an increasingly adverse and turbulent environment including a declining
college-age population 2 and reductions in federal support for research. Many
institutions are being forced to establish stronger ties with business to replace
federal support. Baron and Grunewald (1995, p. 219) suggest that the line
between profit and non-profit institutions is blurring as choices for academic
institutions narrow.
Despite the similarities among institutions of higher education, financial
reporting for the industry is regulated by two different entities (Fischer, 1997,
p. 255). The Financial Accounting Standards Board (FASB) is responsible for
private not-for-profit institutions (and the small number 3 of proprietary
schools). The Government Accounting Standards Board (GASB) is responsible
for public institutions (Fischer, 1997, p. 254). Objectives for financial reporting
1
According to the US Department of Education, there were 1595 public and 1966 private
institutions of higher education in 1994 (National Center for Education Statistics, 1996, p. 216).
The majority (88%) of public institutions are state operated. Most private institutions are private
not-for-profit entities (84%) rather than proprietary or for-profit entities (16%). Over half (56%) of
the not-for-profit schools are religiously affiliated (Snyder et al., 1996, p. 184).
2
High school graduates reached a low in 1993–1994 (the year of the financial statements used in
this study). High school graduates were projected to increase slowly and then drop back down to
the 1993–1994 level in 2001–2002 after which the number of graduates will again begin to grow
steadily and eventually exceed the baby boom numbers by 2009 (Western Interstate Commission
for Higher Education et al., 1993, p. 1).
3
Less than 2% of higher education students were enrolled in the 314 proprietary institutions of
higher education in the US in 1994. However, both the number of institutions and proprietary
enrollment had increased 20% between 1985 and 1994, as compared with a 17% overall increase in
enrollment (Snyder et al., 1996, pp. 174–227).
T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235–275 237
espoused by the two boards are not identical. The FASBÕs primary focus is on
providing information that is useful to resource providers in making rational
decisions about the allocation of scarce resources to business and non-profit
organizations (FASB, 1980, para. 35). The GASB also endorses decision use-
fulness but states ‘‘accountability is the cornerstone of all financial reporting in
government’’ (GASB, 1987, para. 56). From an ethical perspective, account-
ability ‘‘implies a willingness to endure public scrutiny, even an invitation for
the public to scrutinize the behaviors of the organizationÕs leadership’’ and this
duty to report is not limited only to the minimum required by law (Lawry,
1995, p. 175). The annual financial report produced by most entities is one way
they can meet their duty to be accountable to their stakeholders and to society
at large.
In 1995, the FASB implemented Statement of Financial Accounting Stan-
dards (SFAS) Nos. 116 (FASB, 1993a) and 117 (FASB, 1993b) representing a
significant divergence between private and public college and university (C&U)
financial reporting (Fischer, 1997). Prior to implementation, both the FASB
and the GASB recognized the AICPA/NACUBO 4 model for reporting the
financial results of colleges and universities. The current study uses the annual
reports of C&Us from 1994, just prior to the implementation of SFAS Nos.
116 and 117. Various authors have written on the diverse goals represented in
higher education (e.g., Brinkman, 1984, pp. 3–7; Gardner et al., 1985, pp. 9–14;
Geiger, 1986, pp. 241–249; Zemski, 1996, pp. 1–14). As reporting practices
diverge between public and private institutions with the adoption of SFAS Nos.
116 and 117, our study provides a much needed baseline examination of the
factors associated with financial disclosure within these two types of entities. 5
As stated earlier, there are both similarities and dissimilarities between
public and private institutions and their association with financial reporting
practices. The current study falls within a positive theory framework, as that
term is used by Watts and Zimmerman (1986, pp. 4–9), since it attempts to
explain accounting and reporting practices by (1) identifying those factors
associated with financial reporting common to both public and private C&Us,
4
The earliest recommended uniform reports for colleges and universities date back to the first
decade of the 20th century (Brown, 1993, p. 2). The AICPA/NACUBO model refers specifically to
the industry audit guide published by the American Institute of Certified Public Accountants
(AICPA, 1973) and the manuals and guidelines issued by the National Association of College and
University Business Officers (NACUBO, 1990).
5
Changes in the financial reporting requirements for public institutions are underway. See
Engstrom and Esmond-Kiger (1997) for a comparison of the FASB model and the proposed GASB
model for college and university reporting. GASB issued its Statement No. 35 (1999b) amending
Statement No. 34 (1999a) to include public colleges and universities. The new reporting model
based upon full accrual recognition and highly aggregated presentation narrows the divergence
between public and private college and university financial reporting. Significant differences
continue to exist due to dissimilar definitions, classifications and display criteria.
and (2) identifying those factors unique to public and private institutions
respectively.
2. Service efforts and accomplishments
C&Us, whether public or private, do not have a single convenient indicator

of performance comparable to net income, return on investment, or earnings
per share. Many resource providers of C&Us are not direct beneficiaries of the
services provided and are not in a position to ascertain the quality or quantity
of services provided, nor the efficiency with which resources are consumed.
Consequently, both the GASB and FASB emphasize the importance of in-
formation about the efficiency and effectiveness of both service efforts and
accomplishments (SEA). Both boards recommend that non-business organi-
zations supplement their financial statements with non-financial SEA mea-
sures. In particular, the GASB (1994) has emphasized the need for
experimentation with SEA measures. Examples and detailed recommendations
(e.g., Gordon and Fischer, 1990, pp. 29–31; Fischer and Gordon, 1991, pp. 36–
40; Hatry et al., 1990, pp. 57–69) as well as documentation of misleading
measures (Cave et al., 1991, pp. 172–173; Stecklow, 1995, p. A6) have been
published but there is little information on the extent to which SEA reporting
has been implemented within the context of financial reporting.
3. Extent of disclosure literature
Explanations for variations in the amount of information disclosed by eco-

nomic entities in the US have been approached from several perspectives (e.g.,
firms listing a new stock issue (Copeland and Fredericks, 1968), ventures into
foreign markets (Choi, 1973), or from a more positivistic perspective, exploring
firm characteristics such as size, listing status, leverage, audit firm size, etc.,
(Cerf, 1961; Buzby, 1974, 1975; Malone et al., 1993)). Disclosures in other
countries have also been examined (e.g., Baker et al., 1977; Firth, 1979; McNally
et al., 1982; Chow and Wong-Boren, 1987; Wallace and Naser, 1995). 6
There are few studies of C&U reporting in the US (an example is Peat
Marwick Mitchell & Co. (1985) review of annual reports). However, several
studies have examined the quality of reporting practices among public uni-
versities in other countries including Great Britain (Gray and Haslam, 1990),
6
In the area of government reporting, Plewa (1983, p. 124) compared disclosures made by
municipalities with audited versus unaudited annual reports. A synopsis of the findings of these
earlier studies are provided later in the paper as we develop the hypotheses to be tested.
New Zealand (Dixon et al., 1991, 1994; Coy et al., 1993, 1994) and Ontario,
Canada (Banks and Nelson, 1994). Unlike typical extent of disclosure studies
which tend to be cross-sectional in nature, these quality of disclosure studies
are longitudinal, designed primarily to assess changes over time for individual
institutions rather than to identify explanations for differences in disclosure
practices among entities.
Our study contributes to the literature in two ways. First, it provides the first
comprehensive study of extent of financial disclosure by US institutions of
higher education. Second, most prior research of C&U disclosures ignored
private institutions. The current study includes both public and private insti-
tutions and hypothesizes a difference in motivations for disclosure between the
two categories, particularly with respect to SEA disclosures. The effect of
differences in reporting standards between public and private institutions is
minimized by using 1994 data, prior to the adoption of SFAS 117 by most
private schools. 7
The remainder of the paper is organized as follows: first, hypotheses to be
tested are discussed; second, methods used in the study are outlined; and
finally, results are reported.
4. Hypotheses development
In attempting to assess the determinants of disclosure by C&Us, our study

examines the sample in three different groupings: total sample (i.e., public and
private C&Us), public C&Us, and private C&Us. There are certain charac-
teristics that are common to any economic entity including C&Us that may
help explain the extent of disclosure of that entity. For both public and private
C&Us, those characteristics might include size, various configurations of assets
and debt, governance, and audit status.
Public institutions, while sharing the above characteristics with private ones,
are unique in their relationship to state government, including their relation-
ship with the state auditor (Baber, 1983, p. 226). Because of the public support
afforded these institutions, there may be increased monitoring on the part of
the state because of the increased proportionality of their stake in the financial
and operational affairs of the school.
7
Of the 100 institutions included, 90 were following the AICPA audit guide, three were early
adopters of SFAS No. 117 (FASB, 1993b), although not SFAS No. 116 (FASB, 1993a), and four
others were using either the government model or a mix of government and AICPA audit guide
formats. The remaining three institutionÕs reports could not be classified and the notes to the
financial statements (if any) were vague with respect to the specific standards being followed.
Private schools depend heavily on student tuition and fees and on private
donations and gifts. Endowments, therefore, take on a special significance in
the private institution relative to the public institution. Additionally, SEA may
take on special significance to potential contributors and other resource pro-
viders. In our study, SEA disclosures are used as a dependent variable in five of
the hypotheses.
4.1. Total extent of disclosure
A disclosure index comprises items that are expressed as a ratio of the actual
scores of a company compared to the scores which that company is expected to
earn (Cooke, 1991, p. 180). It is created to measure the relative level of dis-
closure by an enterprise. Disclosure indices have been used in many voluntary
disclosure studies (for example, Lim and McKinnon, 1993; Hossain et al.,
1994; Hossain and Adams, 1995; Dixon et al., 1994) on the grounds that the
dependent variables used in these studies are not directly measurable (Marston
and Shrives, 1991, pp. 197–200). Furthermore, Cheng (1992, p. 2) notes that
early studies of the practices of government entities had relied on measures
such as length of financial report, whether the financial statements were audited
and by whom, the size of the state audit budgets as surrogates for the extent
and quality of disclosure. However, due to the existence of multicollinearity
between and among the independent variables, data reduction methods had
employed different measures for the similar constructs (Ingram, 1984, p. 139;
Banker et al., 1989, p. 37; Giroux, 1989, p. 211). As such, selecting specific
variables to explain disclosure practices, in the public sector, is not desirable
(Cheng, 1992, p. 2). Hence Cheng (1992, p. 36) supports the notion of dis-
closure indices to measure the extent of disclosure by enterprises. This ap-
proach has been widely used in public sector studies (see Ingram, 1984,
pp. 134–137; Robbins and Austin, 1986, pp. 413–417; Banker et al., 1989, p. 30;
Giroux, 1989, p. 208; Cheng, 1992, p. 28; Lim and McKinnon, 1993, pp. 202–
203).
4.1.1. Institution size

Perhaps the most prevalent explanatory variable in the extent of disclosure
literature is size of the organization. 8 Foster (1986) suggests that the positive
relationship that appears to exist between firm size and extent of financial
disclosure can be a function of several possible underlying factors, including
8
For the constructs size and audit firm size, our choice of measurement was influenced
significantly by the extant disclosure literature. Wallace and Naser (1995, pp. 316–317) offer an
excellent review of that literature. Rather than replicate that discussion here, we incorporate it by
reference.
increased political costs associated with larger firms, lower competitive costs of
marginal disclosures by larger firms, and economies of scale enjoyed by larger
firms in the production of information (p. 44). In response to the political cost
problem, Leftwich et al. (1981, p. 57) argue that increased financial disclosure
can help to offset monitoring problems arising from increases in organization
size. Their argument also holds true when there is a dispersion of monitoring
agents in place such as larger governing boards (Ingram, 1998, p. 12).
As an economic construct, size can present difficult measurement issues.
Foster (1986) provides guidance on measure of firm size, listing total assets,
sales, and market capitalization (p. 111) as possible measurable surrogates. For
colleges and universities, market capitalization does not present a measurable
value (with the possible exception of C&U tradable debt securities). However,
assets and revenues are measurable in the C&Us––with some caveats. Under
the accounting model used in 1993–1994, many institutions made no attempt to
eliminate interfund accounts receivable and payable, thus inflating total as-
sets. 9 A more serious problem is the valuation of plant assets. Since a C&U
can be hundreds of years old, with fixed assets dating to the inception of the
institution, total assets of different universities can be fraught with systematic
differences. In addition to the usual problems with historical cost accounting
for assets with long lives, private institutions record depreciation on plant
assets (FASB, 1987) but most public institutions do not (GASB, 1988). This
study uses adjusted gross assets (GASSETS), computed by adding back ac-
cumulated depreciation to total assets and removing interfund receivables (if
necessary), in order to make public and private institutions as comparable as
possible. As suggested by Ott (1993, p. 457) the natural log of gross assets was
used because of the original independent variableÕs tendency to produce a non-
linear distribution of error terms in the model. A hypothesis, stated in its al-
ternate form, is suggested by these arguments:
Ha1: Colleges and universities with higher levels of gross assets disclose finan-
cial information to a greater extent than their smaller counterparts.
4.1.2. Governance
The governing boards of colleges and universities are most commonly called
a board of regents or a board of trustees. 10 For the purpose of this study, no
distinction is made among either of these forms, or the others that exist. Of
9
Under GASB (1991, para. 154) Statement No. 14 entity-wide totals were optional and
elimination of interfund receivables and payables was not required.
10
The governing board of 66 institutions was named board of trustees, 20 used board of regents,
and three reported a board of governors. Other governing board names reported by an institution
included curators, overseers, visitors, managers, supervisors, governor and trustees, board of trust,
agriculture, the corporation, and higher education.
immediate concern is simply the number of members of the governing board. It

seems clear, however, just from casual observation that boards of different
institutions take on their own character. There may be asymmetries among
boards that could explain different levels of monitoring in place. For example,
some boards are elected, while others are appointed. Some boards have student
and/or faculty representatives while others do not (McGuinness et al., 1994,
pp. 107–129). These and other asymmetries are beyond the scope of this study.
Much of the literature on governing boards addresses the effect of outside
directors as a monitoring device (e.g., Rosenstein and Wyatt, 1990; Fosberg,
1989; Fama and Jensen, 1983). Boards of C&Us are composed almost exclu-
sively of outside directors, who are normally either appointed by an external
agent (e.g., the governor of a state) or elected by the existing board members
(Madsen, 1998, p. 10). These boards also take on a diverse nature, with board
members coming from diverse racial, gender and experiential backgrounds
(Madsen, 1998, p. 4). Ingram (1998, p. 12) recommends that boards be in-
creased to facilitate improved trusteeship. Supporting that belief is an earlier
finding by Moisan (1992, p. 10) that the general effectiveness of a board was
influenced by its size. The current study proposes that as members are added to
the board, there is a perceived need for higher levels of monitoring. Among
private institutions, large boards may also be desired because of the enhanced
fundraising that may result from having influential and wealthy potential do-
nors serving on the board (Ingram, 1998, p. 14). Both justifications for large
boards are consistent with a positive relationship between board size and extent
of disclosure, resulting in the following hypothesis, again stated in alternate
form:
Ha2: Colleges and universities with more members on the governing board
disclose financial information to a greater extent than do those with few-
er members.
4.1.3. Public versus private

Public institutions are larger than private C&Us in terms of current fund
revenues and enrollment. 11 Therefore, the nature of the population makes it
difficult to avoid this systematic difference. Apart from considerations of size,
however, public institutions may be exposed to greater political costs, due to
11
Geiger (1986, p. 164) reports that only five of the 60 largest universities in the US are privately
controlled. Based on our examination of a primary data source, the Department of EducationÕs
National Center for Educational Statistics, we found that the 1993–1994 current fund revenues of
private institutions averaged $32,250,000 as compared to $65,519,000 for public institutions. From
the same source, Fall 1993 enrollment in private institutions averaged 1552 as compared to 6886 for
public institutions. The data from which these averages were computed are available at http://
nces.ed.gov.
the greater number of constituents to which they are responsible (Kurtenbach

and Roberts, 1994, p. 230). These constituents include taxpayers, the legisla-
ture, and assorted politicians (in addition to students, alumni, bondholders and
accrediting bodies––constituent interest groups relevant to both public and
private schools). Private institutions are not generally subjected to this addi-
tional scrutiny (with the possible exception of additional incentives to disclose
SEA information, as discussed earlier). As such, when holding all other factors
constant, one would expect public institutions to make more extensive dis-
closures consistent with their multifaceted stewardship roles. The third alter-
nate hypothesis of the study is thus suggested:
Ha3: Public colleges and universities disclose financial information to a greater

extent than do private ones.
Classifying C&Us into the categories of public and private is relatively

straightforward with one exception. One land grant university from each state
was selected to represent public institutions in our study. However, Cornell, a
private non-profit institution, is the land grant institution in New York. The
colleges that comprise the land grant activities at Cornell were established by
New York State statute to participate in the Morrill Act of 1862 (Carren, 1958,
p. 13). For the purposes of our study, Cornell is classified as private.
Using a simple dichotomy for the public versus private dimension has po-
tential flaws. The concept of public responsibility for higher education took a
long time to develop in the US. The earliest private institutions (e.g., Harvard
and Yale) received public support and some of the earliest state universities
(e.g., Georgia and North Carolina) were more nearly private than public, often
with self-perpetuating rather than state appointed governing boards (Brub-
acher and Rudy, 1976, p. 145). Regular patterns of tax support for state uni-
versities became more common after the Civil War and the Morrill Act of 1862
(Hofstadter and Smith, 1961, p. 568). Since the second Morrill Act of 1890,
land grant universities have received appropriations from the federal govern-
ment, and state legislatures were spurred to follow suit (Hofstadter and Smith,
1961, p. 568). However, the resulting level of state support is far from uni-
form. 12 Both private and public colleges and universities receive student fi-
nancial aid and research grants from federal, state and local governments. 13
12
Based on an examination of an original data source, the US Department of EducationÕs
National Center for Education Statistics (NCES), we found that the 1995–1996 state appropri-
ations for higher education ranged from $2071 to $6048 per enrolled student with a mean of $3843.
The data from which these averages were computed are available at http://nces.ed.gov.
13
According to the NCES, private institutions received 17.6% of their 1993–1994 revenues from
federal, state and local governments as compared to 50.9% for public institutions of higher
education. This data is available at http://nces.ed.gov.
Some states, particularly those with large private sector enrollments, provide
generous state aid to private institutions (Geiger, 1986, p. 212). However, we
were unable to develop a sound alternative construct for the public versus
private dimension. Too many institutions (primarily the private schools) in our
sample commingled private and governmental support in their financial
statements.
4.1.4. Audit firm size

The size of the audit firm and audit status (audited versus unaudited
financial statements) have been shown to impact financial disclosure (Banker
et al., 1989, p. 52; Baber, 1983, p. 221; Rubin, 1992a, p. 162). Wright (1974,
p. 631); DeAngelo (1981, p. 190); Deis and Giroux (1992, p. 477) and Malone
et al. (1993, pp. 254–255) argue that smaller certified public accounting (CPA)
firms are more sensitive to client demands than are larger CPA firms and thus
generally are associated with lower levels of disclosure. The sample in this
study is comprised of major universities, and most provide financial statements
audited by public accounting firms (76% were audited by Big-6 CPA firms). 14
However, in some states, governmental units are audited by a state agency. The
type of firm doing the audit may be an important influence on the extent of
disclosure of both financial and non-financial information (Sanders and Allen,
1993, pp. 73–75; Raman and Wilson, 1992, pp. 272–275). Rubin (1992a, p. 174
and 1992b, p. 35) reported that municipal finance officers had the perception
that state auditors were at a disadvantage compared to independent public
auditors with respect to their efficiency and expertise. On the other hand, state
auditors do not routinely weigh the risks of malpractice lawsuits and may be
less concerned about including voluntary (unaudited) non-financial indicators
with the annual reports they audit (Copley, 1989, p. 21; Raman and Wilson,
1994, p. 519). The number of C&Us in our study that was not subjected to an
audit was too small to test. The fourth alternate hypotheses, therefore, is:
Ha4: Colleges and universities that are audited by Big-6 CPA firms disclose
financial information to a greater extent than do those audited by smaller
CPA firms or that are subject to state audit.
4.1.5. Leverage
Jensen and Meckling (1976, p. 338) and Daley and Vigeland (1983, pp. 208–
209) argued that firms with a greater proportion of debt, that is more highly
leveraged firms, will incur higher monitoring costs. Myers (1977, p. 161) and
14
At the time of this study, there were six major CPA firms operating in the US (Arthur
Andersen LLP, Coopers & Lybrand LLP, Deloitte & Touche LLP, Ernst & Young LLP, KMPG
Peat Marwick LLP, and Price Waterhouse LLP).
Schipper (1981, p. 87) explained this as a result of conflicts that exist between
debtholders and stockholders. Because stockholders have an incentive to ex-
propriate claims from debtholders, and subsequent debtholders have incentives
to expropriate claims from prior ones, debt covenants arise that may result in
additional disclosure requirements. While universities do not have stockhold-
ers, many issue debt securities, thus suggesting the fifth alternate hypothesis:
Ha5: Highly leveraged colleges and universities disclose financial information

to a greater extent than do less leveraged ones.
4.2. Public colleges and universities
The activities of public institutions are principally focused within the state
and targeted toward the education of state residents (Gardner et al., 1985,
p. 18). To different degrees, members of state legislatures and other oversight
boards can be quite familiar with their constituent institutions, reducing the
need for certain discretionary disclosures. This is due to the many unique re-
lationships that exist across the US between C&Us and their respective state
governments and populations.
In every state, there is but one state legislature. In some states, there is one
governing board for all of the stateÕs public institutions of higher learning
(McGuinness et al., 1994, pp. 77–102). The extent to which attention is focused
on individual schools and the extent to which governing officials are intimate
with the details of the operations of schools will vary dramatically from state to
state (Brubacher and Rudy, 1976, pp. 143–173). For example, in Wyoming,
there is only one four-year school––the University of Wyoming. There is not a
legislator or trustee in Wyoming who is not thoroughly familiar with the fi-
nancial condition and budgetary concerns of the university. 15 In a state like
California or New York, however, legislators may be hard pressed even to
name all the public institutions in the state much less be expected to know the
pressing financial issues at each campus.
A single governing board is created in many states to govern all public in-
stitutions in the state. This probably results in standardized formats for col-
lecting and compiling extensive higher education financial information for the
state. The reporting and dissemination of financial information by the indi-
vidual institution to the consolidated board should result in added disclosure in
part due to the volume of available data the board needs to govern a large,
15
Information provided by Richard H. Miller, Special Assistant to the President of the
University of Wyoming. Mr. Miller was the Director of the Wyoming State Legislative Service
Office from 1988 to 2000. E-mail address: rmille@uwyo.edu.
complex system. By this reasoning, the current study proposes the following
alternate hypothesis:
Ha6: Schools located in states with a single (consolidated) governing board

will disclose financial information to a greater extent than schools in
those states with multiple, relatively decentralized (uncoordinated) gov-
erning boards.
Profiles, roles and responsibilities of governing boards of public higher ed-

ucation institutions in each state was found in the State Postsecondary Edu-
cation Structures Handbook (McGuinness et al., 1994, p. 10).
4.3. Extent of SEA disclosure
Universities strive for educational excellence and institutional prestige and

‘‘there is virtually no limit to the amount that can be spent toward these ends’’
(Geiger, 1986, p. 200). This may cause them to make available certain infor-
mation that is perceived to enhance their reputation. In the US, there have
been three principal ways of feeding higher educationÕs voracious financial
appetite––endowments, taxes, and tuitions (Brubacher and Rudy, 1976,
p. 377).
The remaining hypotheses relate to a subset of the overall extent of dis-
closure scores––those related to SEA and other non-financial indicators in-
cluding enrollment, acceptance rate, etc. As discussed earlier, both the FASB
and GASB have endorsed the need for non-financial indicators (SEA) to make
financial statements fully informative. 16 Nevertheless, this type of reporting is
often published in ‘‘university fact books’’ rather than annual reports (Fischer
and Gordon, 1991, p. 42). With this caveat in mind, the arguments with respect
to SEA disclosures are developed separately for private and public institutions.
4.3.1. Private colleges and universities

While private C&Us are more dependent on tuition than public institutions,
there is considerable variation among private schools. Many private institu-
tions attract students on the basis of their unique approach to education (in-
cluding sectarian) or their academic prestige (Geiger, 1986, pp. 189–195). Such
schools must be able to market their product and justify their claims of su-
periority to a greater extent than public institutions whose tuition rates are
usually much lower (Geiger, 1986, p. 166 and pp. 176–185). Geiger (1986,
16
SEA is discussed in both conceptual frameworks (FASB, 1980, para. 47; GASB, 1994)
although neither standard setting body has yet mandated SEA disclosures. In addition, both boards
have sponsored research studies on the topic (for example Brace et al., 1980; Hatry et al., 1990).
p. 169) puts forward the paradoxical generalization 17 that ‘‘the higher the
tuition a private college or university charges, the less tuition-dependent the
institution is likely to be’’. The highest tuition rates are charged by private
institutions that have other substantial sources of income such as research
universities and highly selective liberal arts colleges (Geiger, 1986, p. 169).
Conversely, less selective private schools often have few other sources of in-
come and are highly dependent on tuition (Geiger, 1986, p. 169). Many of these
schools were established to satisfy unmet needs for higher education in a
particular area rather than to set standards for academic prestige. 18
The other major source of income for private schools is endowment income
and voluntary gifts. 19 Institutions with relatively high levels of endowment
assets may have developed a trust relationship between the institution and its
supporters and this relationship may be maintained and enhanced by disclo-
sures about the institutionÕs accomplishments. Most contributions to C&Us
come from alumni and almost all institutions have ways of keeping in touch
with their graduates. 20 Alumni support is closely related to the undergraduate,
residential education experience and few commuter students develop deep
attachments to their schools (Geiger, 1986, p. 173). The following alternate
hypotheses are thus suggested:
Ha7: Private colleges and universities whose operations are proportionally less
reliant on tuition and fee revenues will disclose SEA information to a
greater extent than do those more reliant on tuition and fees.
Ha8: Private colleges and universities with large endowments will disclose SEA
information to a greater extent than do those with smaller endowments.
Ha9: Private colleges and universities that charge higher tuition fees disclose
SEA information to a greater extent than do those that charge lower
tuition fees.
17
One explanation for the paradox is that high tuition rate schools often provide tuition
discounts that are reported as scholarship expense. Thus the tuition revenue reported may not be
realized in cash making these schools actually less tuition dependent than appears on the surface.
18
Geiger (1986, p. 185) notes that before 1960 state legislators had a ‘‘decided bucolic bias in the
placement of colleges’’ which left unmet needs for higher education in urban areas. The private
institutions that arose to fill the gap were relatively indistinguishable in mission from public
institutions. During the 1960s, a number of these private universities (e.g., Houston and Pittsburgh)
became state controlled.
19
According to the NCES, the largest sources of 1993–1994 current fund revenues for private
institutions were 64.5% from tuition, fees and sales, 17.6% from federal, state and local
governments, and 13.5% from endowment income and private gifts and grants. This data is
available at http://nces.ed.gov.
20
Engstrom (1988, p. 14) found that 1.8% of institutions sent complete financial reports to their
alumni. About a third of the institutions (38% of privates) sent condensed reports that did not
include an auditorÕs opinion (Engstrom, 1988, p. 14).
4.3.2. Public versus private––SEA

Public institutions also rely on tuition and many have sizable endowments.
However, they are supported by the third source of funding––taxes––and this
increases their duty to be accountable (Coy et al., 2001). They disclose infor-
mation to satisfy stewardship interests that arise based primarily on a public
service function (i.e., providing higher education to the residents of the state).
Since all land grant schools have similar missions, few systematic differences in
extent of SEA disclosure are anticipated. However, as argued earlier, state
auditors may be more willing than public accounting firms to be associated
with SEA disclosures.
In contrast to public C&Us, private institutions may have a variety of
missions and objectives (e.g., sectarian or single program such as the College of
Insurance in New York). Schools that compete on the basis of prestige (often
indicated by high tuition rates) and those with greater alumni support, have
stronger incentives to provide a more extensive set of non-financial perfor-
mance measurements. One would expect that this would lead to a higher extent
of disclosure among private institutions, ceteris paribus. The following alter-
nate hypotheses are suggested:
Ha10: Public colleges and universities audited by state auditors disclose infor-
mation about SEA to a greater extent than do those audited by public
accounting firms.
Ha11: Private colleges and universities disclose SEA information to a greater
extent than do public ones.
5. Methodology
This section discusses the methods employed in testing the hypotheses of the
study. First, the population and sample selection procedures are detailed. We
then discuss the procedures used in the content analysis of the annual reports.
Next, the means by which extent of disclosure by the C&Us was measured are
discussed. Finally, the section specifies the models and statistical methods used
to test the hypotheses.
5.1. Population, working population and sample
There were 3362 institutions of higher learning in the US in 1993–1994,

defining the population. Of these, 60.3% were four-year institutions that
granted bachelorÕs degrees. 21 To examine extent of financial disclosure,
21
Statistics were derived from a primary data source, the National Center for Education
Statistics, available at http://nces.ed.gov.
a national sample, evenly divided between public and private institutions, was
used. Smaller public and private institutions have broadly diverse missions,
necessitating severe restrictions in the working population, loosely defined as
large, nationally prominent institutions. This restriction limits the ability to
extend the results of this study to smaller, systematically different types of
institutions. In selecting a sample, we chose land grant schools 22 to generally
represent public institutions because they had the advantage of their land en-
dowments to make them somewhat more comparable to private institutions
which often have substantial gift endowments. To control as much as possible
for differences in mission and to recognize that certain programs are more
resource intensive than others (e.g., engineering versus history), private insti-
tutions with accredited engineering programs (the mechanical arts portion of
the Morrill Act) were chosen as the sample of private institutions. All 50 land
grant institutions have accredited engineering programs and offer other gen-
erally comparable programs such as agriculture and forestry. 23 Under the
Carnegie system, 78.0% of the 50 land grant schools were classified as Research
I or II and the remaining 22.0% were classified as Doctoral I or II or Com-
prehensive I or II. 24 Consequently, we did not include in our sample any
private institutions that were classified as specialized engineering programs or
liberal arts colleges. 25 The variable PUBLPRIV is coded ‘‘1’’ for public in-
stitutions and ‘‘0’’ for privates. Letters requesting their annual report for the
fiscal year ending in 1994 were sent to the 50 land grant universities and all 91
private institutions with accredited engineering programs and the appropriate
Carnegie classification. The response rate from the land grant schools was
100% and the response rate from the private institutions was 73.6%. Two of the
private schools declined to participate, seven sent 1994–1995 statements instead
22
The land grant schools had their official origin with the Morrill Act of 1862 which provided
federal lands to endow state universities dedicated to the agricultural and mechanical arts
(Brubacher and Rudy, 1976, p. 63). However, the federal government had already donated
4,000,000 acres of public land to endow universities in 15 states before the Morrill Act (Brubacher
and Rudy, 1976, p. 154). Cornell postponed selling and realized the largest amount ($5 million) and
a few other schools realized almost a million dollars but 17 states realized $150,000 or less
(Brubacher and Rudy, 1976, p. 379). Compare this to the $3.5 million Johns Hopkins bequest and
the $20 million Leland Stanford bequest (Brubacher and Rudy, 1976, p. 377).
23
Engineering accreditation is the only program accreditation shared by all 50 land grant
institutions (Higher Education Directory, 1993, pp. 489–490). The next most common accreditation
is business with 46 of the 50 land grant institutions having AACSB accreditation (Higher Education
Directory, 1993, pp. 483–484).
24
Classification was determined based on an original data source, The Carnegie Foundation for
the Advancement of Teaching, 1994. This document is currently available at http://www.carne-
giefoundation.org/Classification/. A new classification system is being released in 2000 with more
changes anticipated by 2005.
25
The private institutions in the final sample included Research (43.1%) and doctoral or
comprehensive (56.9%).
of 1993–1994, and one school had to be excluded because it had already im-
plemented SFAS Nos. 116 and 117 (FASB, 1993a,b). This left a sample of
annual reports from 49 public land grants, one private land grant, and 57
private institutions. When a state was represented by the annual report of only
one private institution, that school was selected for the study (10 states). When
reports were received from multiple private institutions in a state, one was
randomly selected (19 institutions). The remaining reports provided a pool of
28 schools from which 21 additional private institutions were randomly
selected to bring the total sample to 100 colleges and universities.
As shown in Table 1, private four-year institutions are more numerous than
public institutions of higher learning in the overall population (63.5% versus
36.5%). However, public schools are much larger than the privates, with 69.5%
of the total enrollment of all four-year institutions. The private institutions
Table 1
Private versus public comparison: sample institutions, working population of accredited engi-
neering programs, and general population of four-year institutions
Institutions included in Accredited engineering General
study programs population
Number Percentage Number Percentage Percentage

a
Enrollment
Public institutions 1,479,105 75.8 3,388,122 80.7 69.5
Private institutions 471,965 24.2 808,024 19.3 30.5
Total 1,951,070 100.0 4,196,146 100.0 100.0
Number of institutionsb
Public institutions 49 49.0 193 63.7 36.5
Private institutions 51 51.0 110 36.3 63.5
Total 100 100.0 303 100.0 100.0
Carnegie classification
Doctoral granting schools 80 80.0 153 50.5 11.3
(Research I and II and
Doctoral I and II)
Masters granting schools 20 20.0 114 37.6 25.3
(Comprehensive I and II)
Other four-year institu- 36 11.9 63.4
tions (Liberal Arts and
Specialized)
Total 100 100.0 303 100.0 100.0
a
Enrollment figures for Fall 1993 were obtained from the 1993 Higher Education Directory
along with the list of 303 accredited engineering programs. General population percentages and
Carnegie classification percentages were derived from Carnegie Foundation for the Advancement
of Teaching (1994) data.
b
Cornell, while a land grant institution, is considered a private school under the Carnegie
classification and its enrollment is included with the other private institutions. Therefore, there are
49 public land grant institutions presented in the table above.
included in our study are some of the largest private schools in the nation, but
as a group their enrollments are much smaller than those at public land grant
institutions. Public land grant schools included in the study represent 75.8% of
the total enrollment but only 49.0% of the institutions. Private institutions
represent 24.2% of the enrollment but 51.0% of the institutions.
Based on our analysis of primary data sources (see Table 1), schools in-
cluded in our study as well as schools with accredited engineering programs are
heavily skewed toward the more prestigious doctoral granting institutions in
terms of both number and enrollment. Doctoral granting schools comprise
80.0% of the institutions included in our study. In comparison, only half of
accredited engineering programs are offered at doctoral granting institutions
(50.5%). With respect to size of student body (not shown on Table 1), en-
rollment at the doctoral granting institutions in our study is 90.3% of the en-
rollment of all the institutions in our study. In comparison, enrollment at
doctoral granting schools that offer accredited engineering programs is 70.8%
of the total enrollment in accredited engineering programs. Enrollment in
doctoral granting institutions is only 44.1% of the enrollment at all four-year
institutions.
Schools included in our study are reasonably representative of accredited
engineering programs with respect to geographic location. While the sample
includes, on average, two institutions from each state, 19 states do not have any
private institutions that offer an accredited engineering program (Higher Ed-
ucation Directory, 1993, pp. 489–490). Responses were not received from the
private institutions in six other states. Consequently, 25 states are represented
only by their public land grant institution.
5.2. Content analysis procedures
Engstrom (1988) examined the information requirements of a diverse set of

users of college and university annual reports. Through the use of an advisory
board, personal interviews with vested parties, and a mail survey, Engstrom
(1988, pp. 133–144) identified 76 disclosures of potential interest to financial
statement users. Subjects in identified user groups were then asked to rate the
relative importance of each of the items in a second mail survey. The disclosure
items rated by EngstromÕs (1988) respondents provided a list of desirable but
primarily voluntary disclosures that served as the basis for our disclosure index
scores.
The 1993–1994 annual reports, obtained from the 100 institutions of higher
learning described above, were analyzed using content analysis procedures to
quantify the extent of disclosures (for a thorough discussion of content anal-
ysis, see Holsti, 1969). To guide the content analysis procedure and help assure
consistent coding, we developed an instrument for internal use that included
the relevant items from the Engstrom (1988) study as well as organizational
characteristics and certain monetary amounts. A binary coding system

was used for all the Engstrom (1988) disclosure items: the item was scored 1 if
the disclosure was present and 0 otherwise. We made no attempt to give ad-
ditional weight for the quality or quantity of the disclosure. For example, an
institution with enrollment data for five years was scored the same as an in-
stitution that reported 10 years of enrollment data with breakdowns by gender
and race.
The instrument was pretested on 10 annual reports and then expanded with
instructions to help ensure consistency among scorers. Each annual report was
then scored by two of the authors and discrepancies were resolved. On average,
the interscorer agreement rate was 84.8%. Most discrepancies were errors of
omission and were easily resolved. To insure consistency over time, the first 10
instruments were re-scored at the end of the data collection phase and the
agreement rate was 98.0%.
5.3. Measuring extent of disclosure
Our study focuses on the extent of financial disclosure of public and private
US colleges and universities (C&Us). Certainly, the definition of financial
disclosure is subject to many interpretations, perhaps ranging from the infor-
mation provided in audited notes and financial statements to any information
set that might be employed by a user in arriving at some decision about the
economic entity at hand. In our study, the financial disclosures examined are
those found in the annual report supplied by the institution. Information in
other documents was not considered.
Measurement of extent of disclosure has a strong foundation in the ac-
counting literature. Most of those studies have used a predetermined list of
disclosures that financial analysts and/or loan officers deemed important in the
investment decision process (see for example Cerf, 1961; Copeland and Fred-
ericks, 1968; Singhvi and Desai, 1971; Choi, 1973; Buzby, 1974, 1975; Plewa,
1983; and Chow and Wong-Boren, 1987.) Both weighted and unweighted in-
dices have been used. In our study, those disclosures identified by Engstrom
(1988, pp. 133–144), as discussed above, were used as our defined information
set. One advantage of using the Engstrom (1988) list is that it is fairly com-
prehensive in its inclusion of disclosures and is derived from responses pro-
vided by the US users of higher education financial reports. In addition, the
mean importance ratings reported by Engstrom (1988) provide weights for
each of the disclosure variables for a variety of constituent groups (see Eng-
strom, 1988, pp. 68–93).
By incorporating user-assigned weighted disclosures, our study attempts to
incorporate the relative importance of different disclosures into the analysis.
Although Robbins and Austin (1986, p. 420) found no material increase in
explanatory power of a compound index over a simple index, conceptually, an
analysis that incorporates the importance of individual disclosures is superior

to one that does not (Robbins and Austin, 1986, p. 420).
Through the content analysis described above, the disclosures provided by
the sample schools were identified, and weights applied. The sum of these
weighted scores were divided by the total possible weighted score for that school
to arrive at a Total Extent of Disclosure (EXTENT) score, which serves as the
first dependent variable in the study. It is based on all of the relevant items in
Engstrom (1988). 26 The second dependent variable, Extent of SEA Disclosure
(SEA), is calculated in the same way as EXTENT but includes only those
Engstrom (1988) items designated as Enrollment Data (Tables 5 and 6 in Eng-
strom, 1988, p. 82) and Performance Measurement (Tables 5–7 in Engstrom,
1988, p. 84). Conceptually, EXTENT and SEA could range from 0% to 100%. A
school that provided none of the Engstrom (1988) disclosures would receive 0%.
A school that provided all possible disclosures would score 100% of the possible
disclosures. Note that the total possible score differed from school to school
because of different economic circumstances. For example, a school with no debt
would be unable to provide disclosures concerning debt maturities, security
provisions, etc. Including those disclosures in the denominator of a school
without such economic circumstances would implicitly penalize those schools.
Appendix A presents descriptive statistics for the EXTENT scores for all sample
schools as well as the SEA disclosure scores which are a subset of EXTENT. 27
5.4. Statistical methods
Ordinary least squares multiple regression models were used in our study to
test the hypotheses detailed above, by category. Table 2 presents the model
used to test the hypotheses related to the overall extent of disclosure scores
(EXTENT) and provides tests for Hypotheses 1–5. Because debt covenants and
other monitoring requirements are a function of the number of issues out-
standing, as well as size of financing relative to the financing institutionÕs size,
there are several possible measures that could be used to test Hypothesis 5. We
used a ratio of debt to equity (DEQUITY) measured as long-term debt divided
by total fund balance. Hypothesis 6 is tested by examining EXTENT scores for
26
Of the 76 original Engstrom items (1988, pp. 133–144), two concerned standard setting and
were not pertinent to individual C&U reports. There was one duplicate item. Certain items were
mutually exclusive, including three types of balance sheet formats and two items related to
depreciation disclosures. Consequently, the maximum possible unweighted score that an institution
could receive was 69. With Engstrom (1988) importance weights attached, the maximum possible
weighted score was 233.04.
27
A list of the institutions included in the study can be obtained from the first author. Also
available is a list of the Engstrom (1988) items showing the frequencies as reported by the 100
public and private institutions included in our sample.
Table 2
Total extent of disclosure models (ordinary least-squares regression)
Model 1 (public and private institutions)
EXTENT a þ b1 LAGASSET þ b2 BRDMBRS þ
b3 PUBLPRIV þ b4 BIG6 þ b5 DEQUITY þ e
where
a Standard intercept
b Standard regression coefficient
LAGASSETS natural log of gross assets adjusted for interfund receivables/
payables
BRDMBRS Number of members on governing board
PUBLPRIV Public or private institution (1 ¼ public, 0 ¼ private)
BIG6 Big-6 or non-Big-6 auditor (1 ¼ Big-6 firm, 0 ¼ other)
DEQUITY Long-term debt to total fund balance
e Standard normal, randomly distributed error term
the 49 public institutions using correlation and linear regression (similar to

Model 4 in Table 3) with all public institutions governed by a state-wide
consolidated governing board coded as 1 and all other institutions coded as 0.
Table 3
Extent of SEA disclosure models (ordinary least-squares regression)
Model 2 (private institutions only)
SEA a þ b1 TUITPCT þ b2 ENDOW þ b3 TUITION þ e
Model 3 (public institutions only)
SEA a þ b1 CONSBRD þ b2 STATEAUD þ e
Model 4 (public and private institutions)

SEA a þ b1 TUITPCT þ b2 ENDOW þ
b3 TUITION þ b4 BIG6 þ b5 PUBLPRIV þ e
where
a Standard intercept
b Standard regression coefficient
SEA Extent of disclosure score for enrollment and performance
measurement items only
TUITPCT Tuition and fees expressed as a percentage of current fund
revenues
ENDOW Natural log of fair value of endowment funds (including quasi-
endowments)
TUITION (In-state) Tuition rate charged for a full-time undergraduate
student
STATEAUD State auditor or non-state auditor
BIG6 Big-6 or non-Big-6 auditor
CONSBRD State-wide consolidated governing board (1 ¼ yes, 0 ¼ no)
PUBLPRIV Public or private institution
e Standard normal, randomly distributed error term
Table 3 presents the models related to the extent of disclosure of SEA, which
is a subset of the overall disclosure index. Model 2 relates to the private in-
stitutions only and is used to examine Hypotheses 7–9. Constructs used for the
independent variables for these three hypotheses are TUITPCT––tuition and
fees expressed as a proportion of total current fund revenues, ENDOW––the
fair market value of endowment and similar funds including quasi endow-
ments, and TUITION––the tuition rate for a full-time undergraduate student.
Model 3 relates to the public institutions only and is used to examine Hy-
pothesis 10 by recoding audit firm size (BIG6) to auditor type. For this new
variable (STATEAUD), financial reports audited by state auditors are scored 1
and those audited by any other type of auditor or unaudited are scored 0.
Model 4 is basically a combination of Models 2 and 3 and is used to examine
Hypothesis 11. The distinctions between public and private institutions are
designated by PUBLPRIV, with public schools coded with a 1 and private
schools coded with a 0. To examine the public versus private dimension for the
overall sample, tuition dependence, tuition rate, endowment and type of au-
ditor were included as control variables.
The disclosure literature is far from conclusive on establishing a dominant
theory on why firms disclose different amounts of information (evidenced by
the predominantly low R2 s) (Malone et al., 1993, p. 266) and no previous
studies of colleges and universities exist to guide model specification. Coeffi-
cients for all variables in each model are reported. 28
6. Results
The total extent of disclosure scores ranged from a high of 59.1% of the
maximum possible score to a low of 17.6%. On average, each institution re-
ported 19.7 disclosure items with a weighted EXTENT score of 30.5%. The
highest extent of SEA disclosure score was 59.6% of the maximum possible
score but 51 institutions provided none of the disclosures and received zero
scores. On average, each institution reported 2.42 of the SEA items or 14.2% of
the 17 possible disclosures (see Appendix A). There was no significant differ-
ence between public and private colleges and universities on either the weighted
or unweighted scores. An examination of Appendix A reveals that there is
28
Stepwise procedures have also been used to examine extent of disclosure models (e.g., Malone
et al., 1993, p. 265). This is a generally accepted procedure when ‘‘there is not enough theory
regarding the importance of candidate variables as explanatory variables’’ Cohen (1991, p. 226).
Using stepwise procedures with this data produced models that included only the significant
coefficients. The adjusted R2 of the reduced models were not materially different than those
reported here.
Table 4
Frequency distribution of auditors responsible for annual audit
Private institutions Public institutions Total
Big-6 accounting firm 49 28 77
Other CPA firm 1 0 1
State auditor 0 17 17
Unaudited report 1 4 5
Total 51 49 100
considerable room for improvement in meeting usersÕ expressed information

needs.
Table 4 shows the extent to which the annual reports we received were
audited, with a breakdown between private and public institutions. The Big-6
prepared all but one of the 78 annual reports audited by CPA firms. Another
17 annual reports were audited by state auditors. The remaining five reports we
received did not include an auditorÕs opinion letter.
Descriptive statistics about the 100 institutions are presented in Table 5. The
difference in adjusted gross assets between public and private institutions was
Table 5
Selected characteristics of sample institutions
Public institutions Private institutions
(n ¼ 49) (n ¼ 51)
Mean Standard Mean Standard
deviation deviation
Panel A: data from financial statements (000 omitted)
Gross assets (adjusted) $1,655,826 $2,561,255 $1,546,481 $1,905,364
Fund balance of endowment $105,499 $182,146 $684,025 $1,104,954
Current fund revenues $890,683 $1,447,924 $440,770 $448,661
Total tuition and fees $133,754 $140,399 $129,429 $103,965
Education and general expenditures $669,181 $955,567 $371,557 $390,315
(current funds)
Long-term debt (all funds) $235,938 $535,968 $186,820 $227,692
Total liabilities (all funds) $380,298 $808,255 $301,002 $340,451
Total fund balance (all funds) $1,202,426 $1,791,377 $1,050,113 $1,438,513
Panel B: other data
Debt equity ratio 21.96% 13.69% 44.93% 25.14%
Annual tuition and fees per student $2758 $1150 $14,964 $3857
Years since founding 128 30 140 59
Total faculty 1618 1285 553 421
Governing board size 15 9 39 13
Enrollment (Fall term, 1993) 40,258 33,101 9861 6682
*
Indicates that means are significantly different at p < 0:05 (two-tail t-test).
not statistically significant, although public institutions were significantly lar-

ger in terms of enrollment, faculty, current fund revenues, and education and
general expenditures. Private institutionsÕ endowments were significantly larger
than those at the public institutions and private schools charged significantly
higher tuition and fees. They also had more members serving on their gov-
erning boards. 29 There were no significant differences between public and
private institutions with respect to long-term debt, total liabilities, or total fund
balances. However, the average long-term debt to fund balance ratio (DEQ-
UITY) was 44.9% for private institutions and 22.0% for public institutions
(p < 0:001, two-tail test).
6.1. Total extent of disclosure models
The ordinary least squares multiple regression procedures used to examine

the hypotheses must be interpreted carefully due to a variety of problems
created by correlated independent variables. With correlated independent
variables, coefficients and intercept terms can be unreliable (Ott, 1993, p. 591).
In that circumstance, the regression coefficient measures only the marginal or
partial effect of the specific independent variable on the dependent variable. In
order to address potential effects of multicollinearity, several methods recom-
mended by Neter et al. (1989, pp. 408–411) were used including examination of
(a) PearsonÕs product–moment correlations of independent variables; (b) ei-
genvalues and variance inflation factors; (c) changes in estimated regression
coefficients as variables were removed from the model using a backward
elimination stepwise procedure; and (d) estimated coefficients with incorrect
signs.
Table 6 shows correlations among the variables used in Model 1. The size
variable, adjusted gross assets, was strongly skewed to the right and a log
transformation (LAGASSET) was used to normalize the distribution and
improve linearity. The relationship between LAGASSET and EXTENT of
disclosure was significant (r ¼ 0:37). Negative correlations between PUBL-
PRIV and BIG6 and between PUBLPRIV and BRDMBRS indicate public
institutions (coded 1) are frequently audited by state auditors rather than ac-
counting firms and have smaller governing boards as compared to private
institutions (coded 0). The only apparently problematic correlation was be-
tween status as public or private with number of board members at )0.733.
29
We contacted all 100 institutions by telephone to obtain information on size of governing
board. Only 59 institutions included a list of board members in their 1993–1994 annual reports. The
information obtained by telephone was consistent with the annual report data when it was
available.
Table 6
Pearson correlations of variables included in Model 1
EXTENT LAGASSET BRDMBRS PUBLPRIV BIG6
LAGASSET
Natural log of adjusted 0.363
gross assets
BRDMBRS
Number of members on 0.088 0.084
governing board
PUBLPRIV
Public institution ¼ 1 )0.078 0.151 )0.733
Private institution ¼ 0
BIG6
Major accounting firm ¼ 1 )0.039 0.056 0.415 )0.463
Others ¼ 0
DEQUITY
Long-term debt to total 0.120 0.003 0.377 )0.495 0.186
fund balance
*
Correlation is significant at the 0.01 level (two-tailed).
Farrar and Glauber (1967, p. 98) and Judge et al. (1982, p. 620) suggested
that simple correlations between independent variables should not be consid-
ered harmful until they exceeded 0.80 or 0.90. Simple correlations of 0.80 or
0.90 are usually associated with variance inflation factors of between 6 and 10.
Variance inflation factors in excess of 10, as Neter et al. (1989, p. 409) point
out, should be considered indications of harmful multicollinearity.
Table 7 reports the results of the regression for Model 1. Including all five of
the hypothesized explanatory variables produced a modest but significant
adjusted R2 of 0.131. However, size was the only independent variable with a
coefficient significantly different than zero. The variance inflation factors and
condition index indicated no major problem with multicollinearity. Thus it
appears that reporting practices of colleges and universities are consistent with
some findings from the for-profit sector: larger institutions make more exten-
sive disclosures than smaller institutions. However, for this sample, leverage
and audit firm size effects were not evident. Likewise, our hypotheses with
respect to the impact of board size and classification as public or private were
not supported.
To test Hypothesis 6, we looked at just the 49 public institutions. The av-
erage overall extent of disclosure score for institutions in states with a con-
solidated governing board for higher education had a lower level of disclosure
than public institutions in other states (27.5% versus 32.0%). The difference
is significant using both the weighted (p ¼ 0:057, two-tail t-test) and the
T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235–275
Table 7
Ordinary least-squares linear regression results for Model 1
R R2 Adjusted R2 Standard error of the
estimate
0.419 0.175 0.131 7.2080454%
ANOVA Sum of df Mean square F Significance
squares
Regression 1037.790 5 207.558 3.995 0.002
Residual 4883.856 94 51.956
Total 5921.647 99
Unstandardized coefficients Standardized t Significance 95% confidence Collinearity

coefficients b interval for b statistics
b Standard error Lower Upper Tolerance VIF
bound bound
Coefficients (dependent variable ¼ EXTENT , overall extent of disclosure weighted index)
(Constant) )3.564 8.803 )0.405 0.686 )21.043 13.914
LAGASSET 2.818 0.679 0.416 4.152 0.000 1.470 4.165 0.875 1.142
BRDMBRS )4.074E)02 0.068 )0.087 )0.602 0.549 )0.175 0.094 0.420 2.381
PUBLPRIV )3.786 2.492 )0.246 )1.519 0.132 )8.733 1.161 0.335 2.986
BIG6YN )2.744 1.965 )0.150 )1.397 0.166 )6.645 1.157 0.760 1.316
DEQUITY 1.918E)02 0.036 0.058 0.533 0.596 )0.052 0.091 0.745 1.342
259
unweighted disclosure scores (26.5% with a consolidated governing board and

31.5% without, p ¼ 0:033, two-tail t-test). This finding was contrary to our
expectations. 30 To further examine the relationship, we ran a ordinary least
squares regression which included the type of auditor as a (dummy) control
variable (equivalent to Model 3 in Table 3 but with EXTENT as the dependent
variable). For this test, we coded STATEAUD ¼ 1 if the institutionÕs financial
statements were audited by a state agency and STATEAUD ¼ 0 if unaudited
or audited by a CPA firm. Adjusted R2 for the model was 0.078 with a sig-
nificance level of p ¼ 0:057 (two-tail test). The coefficient for STATEAUD was
positive but not significantly different from zero. 31 The coefficient for
CONSBRD was negative and significant (p ¼ 0:072, two-tail test). Both the
negative correlation and coefficient would seem to indicate that institutions in
states with consolidated governing boards for higher education do not view
their audited financial statements as an important part of their reporting ob-
ligation. Perhaps other information prepared on a uniform basis by all insti-
tutions reduces the need for additional voluntary disclosures within the annual
report.
6.2. Extent of SEA disclosure models
Model 2 included only the 51 private institutions. Examination of the cor-

relation matrix for the variables provided similar results to those shown in
Table 8, which includes all 100 institutions. SEA was positively associated
(r ¼ 0:549, p ¼ 0:000, two-tail test) with the annual tuition and fees charged to
students by private schools (TUITION) and with ENDOW (r ¼ 0:491, p ¼
0:001, two-tail test), the natural log of the fair value of the institutionÕs en-
dowment. The hypothesized negative relationship between SEA and TUITPCT
was supported (r ¼ 0:441, p ¼ 0:001, two-tail test). There was a strong neg-
ative correlation between ENDOW and TUITPCT (r ¼ 0:734, p ¼ 0:000,
two-tail test) that is a potential source of muftieollinearity for Model 2.
The ordinary least squares regression results for Model 2 were signifi-
cant (p ¼ 0:000, two-tail test) with an adjusted R2 of 0.321. As predicted in
the hypotheses, the coefficient for TUITION was positive and significant
(t ¼ 3:480, p ¼ 0:0011, two-tail test), and the coefficient for TUITPCT was
negative and significant (t ¼ 2:071, p ¼ 0:0438, two-tail test). The constant
term and the size of the endowment terms were negative but not significantly
30
With respect to the 17 SEA disclosures only, there was no difference in means for either the
weighted or unweighted disclosure index score.
31
As an alternative, we used BIG6 as the control variable for type of auditor. This model had a
similar adjusted R2 (p ¼ 0:089, two-tail test) and the coefficient for BIG6 was negative but not
significantly different from zero.
Table 8
Pearson correlations of variables included in Model 4
SEA TUITPCT ENDOW TUITION BIG6 STATEAUD CONSBRD

TUITPCT
Tuition and fees as percentage of )0.230
current fund revenues
ENDOW
Natural log of fair value of all 0.183 0.059
endowments
TUITION
Undergraduate annual tuition 0.176 0.498 0.533
rate (in-state)
BIG6
Major accounting firm ¼ 1 )0.152 0.297 0.371 0.459
Others ¼ 0
STATEAUD
State auditor ¼ 1 0.144 )0.326 )0.227 )0.439 )0.828
Others ¼ 0
CONSBRD
Consolidated governing )0.041 )0.361 )0.504 )0.537 )0.322 0.195
board ¼ 1
None or private ¼ 0
PUBLPRIV
Public institution ¼ 1 )0.005 )0.652 )0.438 )0.907 )0.463 0.462 0.558
Private institution ¼ 0
*
**
261
different from zero. Despite the high correlation between ENDOW and TU-
ITPCT, all of the variance inflation factors were <10. 32
To test Hypothesis 10, we looked at only the 49 institutions classified as
public. The type of auditor for public institutions is reported in Table 4. The
SEA scores were 15.4% for the 17 institutions with state auditors and only 7.7%
for the 28 institutions audited by Big-6 accounting firms. The four schools that
sent unaudited financial statements had an average not significantly different
from the mean of 10.6% for public institutions in our sample. Since there may
be differences in reporting practices related to the existence of a state-wide
consolidated governing board for higher education, Model 3 included
CONSBRD as a control variable (1 ¼ consolidated board, 0 ¼ no consoli-
dated board). The independent variable STATEAUD carried a value of 1 if the
institution was audited by the state auditor and a value of 0 if audited by a
public accounting firm or unaudited. STATEAUD and SEA were positively
correlated (r ¼ 0:26, p ¼ 0:074, two-tail test). Adjusted R2 for Model 3 was
0.028 (F ¼ 1:699, p ¼ 0:194, two-tail test) with a positive and significant co-
efficient for STATEAUD (p ¼ 0:083, two-tail test). Omitting CONSBRD from
the model would have increased adjusted R2 to 0.046 (F ¼ 3:339, p ¼ 0:074,
two-tail test). In other words, type of auditor explained very little of the dif-
ference in extent of disclosure.
To test for differences between public and private institutionsÕ SEA disclo-
sures, the combined Model 4 controls for tuition, endowment, and tuition
dependence (variables from Model 2) as well as auditor type. Table 8 shows the
correlations among the variables included in Model 4. In contrast with the
relationship that held for private institutions, a high tuition rate (TUITION) is
positively associated with reliance on tuition and fees for operating revenues
(TUITPCT) and the market value of the institutionÕs endowment (ENDOW).
The correlations also highlight certain systematic differences between public
and private institutions: public institutions have lower tuition rates (TU-
ITION), are less reliant on tuition for operating revenues (TUITPCT), and
have smaller endowments (ENDOW). Private institutions relied on tuition for
44.5% of current fund revenues as compared to 17.6% for public institutions.
PUBLPRIV is strongly correlated with STATEAUD since only public insti-
tutions had state auditors.
32
The highest variance inflation factor for this model was 3.8 but the condition index for the
fourth dimension was 42 which is above the criteria recommended by Neter et al. (1989, p. 405).
This means that multicollinearity may have influenced the results (Belsley et al., 1980, p. 105).
Multicollinearity does not affect the explanatory power of a model but it does make it difficult to
assess the relative importance of independent variables (Belsley et al., 1980, p. 105). Therefore, it is
possible that a different sample would produce a model in which ENDOW would be substituted for
one of the other two variables.
Table 9 shows the ordinary least squares regression results. The results are
consistent with Models 2 and 3 showing only PUBLPRIV as an additional
independent variable (although the variable representing auditor type is BIG6
rather than STATEAUD). The model is significant (F ¼ 6:321, p < 0:000, two-
tail test). Tests for presence of multicollinearity were all satisfactory. As a
group, the variables explained 21.2% of the entire variance in extent of dis-
closure of SEA and enrollment information. All independent variables other
than ENDOW were significant although signs were not always in the hy-
pothesized direction. The results suggest that state auditors may be more
willing than public accounting firms to be associated with SEA disclosures and
that prestigious institutions with high tuition rates tend to provide more SEA
disclosures. Institutions highly dependent on tuition and fees as a source of
operating revenue tend to provide fewer SEA disclosures.
An alternate way of looking at extent of disclosure would be to compare
institutions which provided a corporate style annual report as compared to
those that provided only a basic set of financial statements. We defined as
corporate style any annual report that included photos, graphics, or a man-
agement discussion and analysis. Table 10 presents some statistics associated
with this dichotomy. The primarily voluntary disclosures rated by the re-
spondents to the Engstrom (1988) study are more likely to be found in cor-
porate style annual reports as indicated by the significant difference in means
(p ¼ 0:001, two-tail t-test). This is particularly true for the SEA indicators. 33
In addition to the mean disclosure index scores, Table 10 displays the fre-
quencies associated with several significant causal factors. 34 Reports audited
by Big-6 firms were distributed about equally across the two styles but other
auditors and unaudited report were associated with the corporate style far
more often than with the basic report style. Research institutions tended to use
the corporate style while doctoral and comprehensive institutions reported
using the basic report style. Public institutions tended to employ the corporate
style for financial reporting while private institutions used the basic report
format.
6.3. Summary of hypotheses
To test the 11 hypotheses established earlier, the proposed models for extent
of disclosure by public and private colleges and universities were examined for
33
Thanks to an anonymous reviewer who suggested this alternate approach to looking at our
results.
34
Thanks to an anonymous reviewer, we collected data by a telephone call to the institution
about the CFOÕs credentials of all the institutions in the sample. Most CFOs were also CPAs (73%)
and many had advanced degrees. However, contrary to expectation, we found no significant
relationship between credentials or education and extent of disclosure.
264
Table 9

Ordinary least squares linear regression results for Model 4
R R2 Adjusted R2 Standard error of the esti-
mate
0.502(a) 0.252 0.212 13.0678678
ANOVA Sum of df Mean F Significance
squares square
Regression 5396.816 5 1079.363 6.321 0.000(a)
Residual 16052.302 94 170.769
Total 21449.117 99
Unsaturated coefficients Standard- t Significance 95% confidence interval Collinearity statistics

ized coeffi- for b
cients b
b Standard Lower Upper Tolerance VIF
error bound bound
Coefficients (dependent variable ¼ SEA, extent of disclosure score for enrollment and performance items only)
(Constant) )4.521 11.237 )0.402 0.688 )26.833 17.791
TUITPCT )0.176 0.091 )0.248 )1.939 0.055 )0.355 0.004 0.488 1.142
ENDOW 0.355 0.601 0.066 0.591 0.556 )0.838 1.549 0.632 1.582
TUITION 1.816E)03 0.001 0.834 3.610 0.000 0.001 0.003 0.149 6.712
BIG6 )8.848 3.596 )0.254 )2.460 0.016 )15.989 )1.708 0.746 1.341
PUBLPRIV 14.678 7.439 0.501 1.973 0.051 )0.092 29.449 0.123 8.099
Table 10
Disclosure as a function of annual report style with causal factors
Mean
Corporate style Basic report
(n ¼ 57) (n ¼ 43)
Total disclosure index 33.5 26.4
SEA disclosure index 18.2 0.6
Cross-tabulations
Corporate style Basic report
(Frequency) (Frequency)
Reports audited by Big-6 accounting firms 39 38
Other auditors and unaudited reports 18 5
v2 ¼ 5:509, significance (two-sided) ¼ 0:029 57 43
Research I and II institutions 43 18
Doctoral and Comprehensive institutions 14 25
Public institutions 33 16
Private institutions 24 27
significance. As discussed before, the regression models explained only a small

portion of the variance in level of disclosure. For all models, the observed sign
and significance of the t-statistic for the regression coefficients were examined
to determine whether the research hypothesis associated with each variable was
supported. The following is a summary of the conclusions:
Ha1: (Supported) Colleges and universities with higher levels of gross assets
disclose financial information to a greater extent than their smaller
counterparts (Table 7).
Ha2: (Not supported) Colleges and universities with more members on the
governing board did not disclose more information than institutions
with fewer members.
Ha3: (Not supported) Public institutionsÕ disclosures were less extensive than
those of private institutions (Table 7) when institutional size was also
taken into consideration. However, public institutions were significantly
more likely to provide a corporate style report (Table 10).
Ha4: (Not supported) Annual reports audited by major accounting firms
were associated with a lower overall level of disclosure but the difference
was not statistically significant (Table 7).
Ha5: (Not supported) Leverage as measured by a debt to equity ratio was not
associated with a higher level of disclosure (Table 7).
Ha6: (Not supported) The presence of a state-wide consolidated governing

board for public colleges and universities was actually associated with
a lower level of disclosure.
Ha7: (Supported) Private colleges and universities whose operations are pro-
portionally more reliant on tuition and fees disclosed significantly less
SEA information than institutions less reliant on tuition and fees (Table
9). This was particularly true for private institutions (Model 2).
Ha8: (Not supported) Private institutions with large endowments reported
more information about SEA. However, private colleges and universities
with large endowments were less dependent on tuition and had higher
tuition rates than private institutions with smaller endowments. The di-
rect relationship between SEA disclosures and endowment was not sup-
ported when these variables were included in the regression for Model 2.
Ha9: (Supported) Private colleges and universities with higher tuition fees
disclosed SEA information to a greater extent than institutions with
lower tuition fees.
Ha10: (Supported) Public colleges and universities audited by state auditors
disclosed information about SEA to a greater extent than did those au-
dited by public accounting firms. For the full sample, a lower level of
SEA disclosure was associated with annual reports audited by the ma-
jor accounting firms (Table 9).
Ha11: (Supported) Public institutions disclosed SEA information to a greater
extent than private institutions once the effect of tuition dependence,
tuition rate, and audit firm were controlled (Table 9).
7. Implications and conclusions
An examination of variables for their relationship with total extent of dis-

closure and extent of service efforts and accomplishment disclosure was em-
ployed to determine whether systematic differences exist among colleges and
universities. The overall conclusion of this study is that there are some sys-
tematic differences among colleges and universities that are associated with
different amounts of information provided in their annual financial reports.
These differences lend some justification to the FASB approach in SFAS Nos.
116 and 117 (FASB, 1993a,b). However, the overall low level of reporting
brings to question the GASBÕs decision to prohibit public colleges and uni-
versities from adopting the FASB reporting model (GASB, 1995). The new
reporting model issued by GASB (1999a) for state and local governments and
extended to colleges and universities by GASB (1999b) Statement No. 35
narrows the divergence but significant differences continue to exist due to
dissimilar definitions, classifications and display criteria.
Our study found total gross assets (total assets plus accumulated deprecia-
tion) is significant in explaining total extent of disclosure (see Table 7). Prior
studies (e.g., Cerf, 1961, p. 110; Buzby, 1975, p. 30; Chow and Wong-Boren,
1987, p. 540) found entity size to be associated with extent of financial dis-
closures. This study supports those findings. Larger higher education institu-
tions disclose more data. The larger entities may be responding to higher
accountability expectations and political visibility. Moreover, bigger institu-
tions due to economies of scale can disclose data more cost effectively.
Our study also found three variables (tuition rate, tuition revenue as a
proportion of current revenues, and auditor type) were statistically significant
in explaining the extent of SEA disclosure (see Table 9). The tuition variables
focus on the teaching function. Private institutions with higher tuition fees may
disclose more information as a promotional exercise to better compete against
rival private schools.
Table 10 examined causal factors of reporting styles. The evidence showed
significant differences between the corporate style versus the basic report for
both SEA and total disclosures. A large, public, state audited institution was
more likely to generate an extensive corporate style report. These entities may
be focused on the promotional benefits or may be striving to meet greater
accountability expectations.
As expected, public institutions beholden to taxpayers as well as other
constituent groups, provided more SEA disclosures than their private coun-
terparts. This trend is consistent with accountability tenets. State auditors in-
fluenced higher levels of SEA disclosures. This factor is also occurring
overseas. For instance, in Australia, state auditor generals are requiring ex-
tensive performance indicator disclosures (Coy et al., 1994). Again a higher
level of accountability expectations seems to be driving accounting disclosures.
Our study results do not support several other hypotheses. For instance, the
type of governance and level of leverage were not predictors of disclosures. In
both cases it may be that the proxy variables are not sufficiently accurate mea-
sures. Governance was measured by size of board, however, one or two powerful
leaders could radically change disclosure expectations. Leverage, as measured
by debt to equity ratio does not in itself explain the closeness to any debt cov-
enant constraints and in general the level of overall debt was relatively low.
The responsiveness of an institution to the demands placed on it for ac-
countability is indicated by the type and quality of information it provides to
its stakeholders (Coy et al., 2001). Financial statement usersÕ assessments, if
based on limited information, may not be helpful or accurate. The information
used by administrators to allocate resources to programs and to assess the
effectiveness of those services is the same type of information that would be
useful to other constituents (i.e., students, alumni, parents, bondholders, ac-
creditation bodies, taxpayers and others). Various ratios and other analyses
have been developed to assess the degree of financial success (for example, see
Dickmeyer and Hughes, 1980; Salluzzo and Prager, 1999). SEA, however, must
be based on a host of non-financial indicators that attempt to measure the
economy, efficiency, and effectiveness of the institution. While the public may
have the right to know, the annual reports analyzed for our study showed
considerable room for improvement. In particular, the lack of enrollment in-
formation means that financial statement users would be unable to compute a
variety of commonly recommended ratios used in analyzing financial condition
such as acceptance rate, expenditures per student, and tenured faculty ratio. In
New Zealand, the periodic reporting of a qualitative disclosure index has been
found to improve the external reporting practices of public universities (Coy
and Dixon, 1996, p. 37) and studies like ours could provide a nucleus for
a similar trend of improvement in the US.
Our study was unique in that the content analysis procedure for each in-
stitution in the population was scored by two individuals, with a reconciliation
performed in each case. Most of the discrepancies found in the reconciliation
were errors of omission and were easily resolved. A search of the extent of
disclosure literature found no other double scored content analysis in the ex-
tent of disclosure literature.
Several limitations to the study must be addressed. First, the identification
of surrogate college and university variables to adequately measure financial
attributes may be a limitation. In particular, size is commonly measured by
sales and market capitalization variables (Foster, 1986, p. 111), neither of
which is relevant to colleges and universities. While enrollment and current
fund revenues might have been used an independent variables, we used the log
of adjusted gross assets. Our results showed a clear size effect, consistent with
past literature (e.g., Cerf, 1961, p. 110; Singhvi and Desai, 1971, p. 137).
Second, the extent of SEA disclosure measure made no attempt to evaluate
the quality of disclosure. A single sentence description of faculty accomplish-
ments received the same score as a detailed report of several pages. The sub-
jective nature of a quality-based ranking preclude this approach. Moreover,
even with this caveat, it is safe to say that most institutions are not using their
annual reports as a vehicle to tout their student and faculty accomplishments.
A third limitation to our study is the possible problem associated with
correlated variables. The use of highly correlated variables that perhaps mea-
sure the same attribute, such as tuition charged and the type of institution,
could be a limitation although the variance inflation factors did not exceed the
level suggested by Neter et al. (1989, p. 409).
The fourth and principal limitation to our study is the composition of the
population. Because public and private institutions have such diverse missions,
our study used accredited engineering programs for its common base, which
necessitated a restriction in the population. Not all states have private four-year
institutions. Of those states that do have private four-year institutions, some
states do not have four-year institutions that have accredited engineering pro-
grams. This restriction limits the ability to extend the results of our study na-
tionally to all higher education institutions in the US, particularly the smaller,
systematically different types of colleges and universities. International exten-
sions would be even more tenuous given the very different ways the delivery of
higher education is organized elsewhere (see Geiger, 1986, 1988). Despite these
limitations our study provides important insights on determinants of disclosure.
Examination of extent of disclosure through a positive theory lens has the
potential to provide regulators with an increased understanding of what mo-
tivates entities to provide information as part of the financial reporting process.
Our study adds to the body of knowledge because it examines a different re-
porting environment, higher education. This setting is particularly interesting
because it is regulated by two different private sector standard setting boards.
Like most other extent of disclosure studies (e.g., Cerf, 1961; Copeland and
Fredericks, 1968; Buzby, 1974, 1975; Choi, 1973), this analysis of college and
university financial reporting is cross-sectional in nature. Future study of the
impact of implementation of SFAS 117 by private colleges and universities
is recommended. Such studies will provide interesting insights into perceptions
of reporting quality after adoption.
Acknowledgements
The authors wish to thank Dr. John H. Engstrom (Northern Illinois Uni-
versity), Dr. David Coy (University of Waikato, New Zealand), and Dr. Marla
Myers Kraut (University of Idaho) for their valuable comments and assistance.
We also appreciate the comments of the anonymous reviewers.
Appendix A
Descriptive statistics for institutioins included in study with overall (EX-

TENT) and SEA disclosure index scores
Descriptives and percentiles

Descriptives and percentiles Statistic Standard error
Extent of disclosure score––Overall
Mean 30.5412015% 0.7733991%
95% confidence interval Lower bound 29.0066099%
for mean Upper bound 32.0757931%
5% trimmed mean 30.0257657%
Median 29.0787500%
Variance 59.815
Standard deviation 7.7339908%
Minimum 17.59436%
Maximum 59.05430%
Range 41.45994%
Interquartile range 9.3179525%
Skewness 1.091 0.241
Kurtosis 1.346 0.478
Extent of disclosure score––SEA only
Mean 10.6713799% 1.4719299%
95% confidence interval Lower bound 7.7507517%
for mean Upper bound 13.5920081%
5% trimmed mean 9.0976718%
Median 0.0000000%
Variance 216.658
Standard deviation 14.7192986%
Minimum 0.00000%
Maximum 59.57411%
Range 59.57411%
Interquartile range 18.5689900%
Skewness 1.388 0.241
Kurtosis 1.218 0.478
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++A Comparative Empirical Examination of Extent of Disclosure by Private and Public Colleges and Universities in The United States

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Journal of Accounting and Public Policy 21 (2002) 235–275

A comparative empirical examination

2. Service eﬀorts and accomplishments

C&Us, whether public or private, do not have a single convenient indicator

3. Extent of disclosure literature

Explanations for variations in the amount of information disclosed by eco-

In attempting to assess the determinants of disclosure by C&Us, our study

4.1. Total extent of disclosure

4.1.1. Institution size

immediate concern is simply the number of members of the governing board. It

4.1.3. Public versus private

the greater number of constituents to which they are responsible (Kurtenbach

Ha3: Public colleges and universities disclose ﬁnancial information to a greater

Classifying C&Us into the categories of public and private is relatively

4.1.4. Audit ﬁrm size

Ha5: Highly leveraged colleges and universities disclose ﬁnancial information

4.2. Public colleges and universities

Ha6: Schools located in states with a single (consolidated) governing board

Proﬁles, roles and responsibilities of governing boards of public higher ed-

4.3. Extent of SEA disclosure

Universities strive for educational excellence and institutional prestige and

4.3.1. Private colleges and universities

4.3.2. Public versus private––SEA

5.1. Population, working population and sample

There were 3362 institutions of higher learning in the US in 1993–1994,

Number Percentage Number Percentage Percentage

5.2. Content analysis procedures

Engstrom (1988) examined the information requirements of a diverse set of

characteristics and certain monetary amounts. A binary coding system

5.3. Measuring extent of disclosure

analysis that incorporates the importance of individual disclosures is superior

5.4. Statistical methods

the 49 public institutions using correlation and linear regression (similar to

Model 4 (public and private institutions)

considerable room for improvement in meeting usersÕ expressed information

not statistically signiﬁcant, although public institutions were signiﬁcantly lar-

6.1. Total extent of disclosure models

The ordinary least squares multiple regression procedures used to examine

Unstandardized coefficients Standardized t Significance 95% confidence Collinearity

unweighted disclosure scores (26.5% with a consolidated governing board and

6.2. Extent of SEA disclosure models

Model 2 included only the 51 private institutions. Examination of the cor-

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235–275

6.3. Summary of hypotheses

T. Gordon et al. / Journal of Accounting and Public Policy 21 (2002) 235–275

Unsaturated coefficients Standard- t Significance 95% confidence interval Collinearity statistics

signiﬁcance. As discussed before, the regression models explained only a small

Ha6: (Not supported) The presence of a state-wide consolidated governing

7. Implications and conclusions

An examination of variables for their relationship with total extent of dis-

Descriptive statistics for institutioins included in study with overall (EX-

Descriptives and percentiles

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