The Information Content and Investor Reaction to SEC Disclosures by Foreign Firms

Abstract

SEC rules only obligate US-listed foreign firms to supply ongoing disclosures via SEC Form 6-K if it is mandated by their home country exchange or laws. Heterogeneity in transparency and reporting requirements across countries yields significant variation in the discretion firms have to publicly supply information. We show that foreign firms from weaker reporting regimes, and those whose shares trade exclusively on a US exchange, experience greater investor interest and larger market reactions around these filings, but these firms provide significantly fewer disclosures. Moreover, firms supplying more 6-Ks exhibit lower residual uncertainty when reporting annual earnings and have lower overall information asymmetry. Our paper highlights that listing in the US does not subject foreign firms to strict regulatory Our paper highlights that listing in the US does not subject foreign firms to strict regulatory disclosure requirements, but evidence on investor information acquisition and trading behavior suggests market-based incentives encourage firms to provide timely and value-relevant information flows.