Niamh M. Brennan, Doris M. Merkl-Davies


This paper reviews prior research on discretionary accounting narratives, adopting a preparer perspective. We develop an analytical framework to organize our review which classifies prior research according to three components: antecedents, characteristics, and consequences of disclosures. We first overview our framework. We then discuss each framework component. Antecedents comprise the external context and internal environment. The paper addresses multiple discretionary accounting narrative characteristics. Consequences comprise share price reaction studies, experimental studies of users’ responses to discretionary accounting narratives, and firm consequences such as corporate reputation, image, legitimacy and trust. We conclude the paper with an extensive agenda for future research.