Does mandatory operating information disclosure affect stock price crash risk? Evidence from China

Abstract

By employing the staggered implementation of the Industry Disclosure Guidelines of China, we find that mandating firms to disclose operation-related information increases their stock price crash risk, contrary to regulators' expectation. The effect is more pronounced when the treated firms possess more proprietary costs, face fiercer industry competition, or exhibit more complex operating activities. Further analyses indicate that the strategic response of executives to this regulation accounts for the heightened stock price crash risk following the Industry Disclosure Guidelines. Overall, we document that obligatory disclose of more operating information in emerging market with weak investor protection may worsen a firm's information environment.