Disclosure Rules Research Articles

Human capital disclosures and institutional ownership

We examine the effects of human capital disclosures on ownership structure. Firms which are highly intangible experienced an increase in institutional ownership concentration subsequent to the introduction of human capital disclosure rule. Using a differences-in-differences empirical design, we document that these firms also engaged in more earnings management. Collectively, these findings highlight the role of information disclosures in shaping ownership structure and corporate behaviors.

Closing the Divide: How Pay Transparency Drives Progress on Gender Pay Equity

Gender pay gaps persist as a stubborn workplace inequity despite decades of progress toward closing divides. As an organizational effectiveness consultant passionate about advancing fair treatment, this inconsistency struck the author as an issue warranting innovative solutions. This article explores the promising approach of mandated pay transparency policies, which require companies to publicly disclose information about employee compensation. Research indicates locations instituting disclosure rules see significant narrowing of gender pay differentials over time. Case studies of companies like Google and Anthropic also demonstrate how transparency motivates self-examination resolving subtle barriers driving differences. While challenges remain, transparency seems to cultivate accountability and merit-based cultures where qualifications alone determine rewards. As these laws continue spreading, their ability to reshape environments into ones of true equity, justice and inclusion will likely strengthen further.

Compatibility between the Auditor and the Institutional Investor and its Impact in Evaluating Requirements with International Accounting Disclosure Standards

The study examined the requirements of accounting disclosure standards from the perspectives of institutional investors and external auditors, highlighting the distinctions between their respective perspectives. due to the importance of the data generated in the financial statements that the institutional investor needs to make investment decisions, and the difference in viewpoints regarding the amount of data disclosure between the two parties. It focusses on outlining what needs to be reported in joint-stock firms' financial statements in a way that promotes objectivity in the financial statements and is transparent, appropriate, and adequate. The study had three main components: the literature and theoretical foundations of accounting disclosure and external auditors comprised the second axis, and the overall methodological framework of the study addressed the first.The idea of disclosure and transparency in the financial statement presentation was covered in the first topic, and the auditor's role and responsibilities in disclosure and transparency in financial reports were covered in the second. As for the third axis, it focused on the practical framework of the research, where an analysis of the sample members’ responses to questionnaire forms distributed to (100) external auditors and (100) institutional investors was presented. The questionnaire questions included three axes, the second axis, which dealt with the income statement's duties under accounting disclosure rules, and the first. It is focused on the balance sheet requirements of accounting disclosure rules. The requirements for accounting disclosure rules for contingent liabilities and events that occur after the budget were covered under the third axis. The research came to several findings after analysing the data for the questions using the SPSS statistical tool. The most important of which were :- The external auditor and the institutional investor have largely agreed upon the requirements of accounting disclosure standards for the income statement. The auditor is particularly interested in the paragraphs that discuss granting credit facilities and avoiding reliance on secondary sources of income, while the investor is more interested in the paragraphs that discuss income and expenses associated with the.fundamental income-generating activities When assessing the accounting disclosure requirements for the balance sheet, the institutional investor and the external auditor have a lot in common. The sections of the financial statements that highlight the uses of money and the requirement to disclose them to users, such as the institutional investor who was concentrating on these lines, are of particular importance to the auditor.due to the fact that they bear in It is fraught with dangers. The external auditor and the institutional investor have essentially reached consensus over their respective points of view when evaluating the accounting disclosure requirements for contingent liabilities and subsequent events . While the investor is primarily focused on the accounting disclosure, the auditor is especially interested in the criteria that revolve around the paragraphs referring to the total value of the provision for losses on loans and advances provided .requirements that place an abnormally high priority on risk In order to set disclosure standards and determine the quantity and quality of data that should be displayed in financial reports while maintaining the transparency necessary to achieve objectivity, the research advises considering the perspectives of the entities that stand to gain from the data generated in those reports as well as the regulatory authorities represented by the external auditor. These guidelines must be updated periodically since investor behaviour changes in response to political, social, and economic factors.

Has the Transparency Directive benefited the United Kingdom?

Post Brexit, this study contributes to assessing the efficacy of the European Union (EU) Transparency Directive (TPD) in attaining its regulator-specified goals for the United Kingdom (UK) capital market. During its adoption in 2004, the Commission of European Communities and the UK Government argued that TPD adoption should increase firms’ financial reporting quality and investment efficiency while decreasing firms’ cost of capital and information asymmetry. Using several alternative test variables in a sample of FTSE All-Share Index firms, I find evidence consistent with these four goals following TPD adoption. Additionally, I find that firms have lower cash holdings and higher dividend payouts following TPD adoption. Most of these trends do not reverse after the 2014 TPD amendment that abolished mandatory quarterly trading updates. This is the first study to examine the association between TPD adoption and firms’ cost of capital, investment efficiency, cash holdings, and dividend payout. Collectively, my results suggest that the primary regulatory goals of the TPD are being attained in the UK. Therefore, a case can be made for the relevance of the TPD and the resulting Disclosure and Transparency Rules in UK post Brexit.

Measuring Corporate Human Capital Disclosures: Lexicon, Data, Code, and Research Opportunities

ABSTRACT Human capital (HC) is increasingly important to corporate value creation. Unlike other assets, however, HC is not currently subject to well-defined measurement or disclosure rules. We use a machine learning algorithm (word2vec) trained on a confirmed set of HC disclosures to develop a comprehensive list of HC-related keywords classified into five subcategories (DEI; health and safety; labor relations and culture; compensation and benefits; and demographics and other) that capture the multidimensional nature of HC management. We share our lexicon, corporate HC disclosures, and the Python code used to develop the lexicon, and we provide detailed examples of using our data and code, including for fine-tuning a BERT model. Researchers can use our HC lexicon (or modify the code to capture another construct of interest) with their samples of corporate communications to address pertinent HC questions. We close with a discussion of future research opportunities related to HC management and disclosure. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: B40; C80; M14; M41; M54.

Empirical evidence on disclosing cyber breaches in an 8-K report: Initial exploratory evidence

The primary objective of this exploratory study is to assess whether 8-K disclosure, compared to alternative disclosure, explains the inconsistent results in prior studies examining the impact of cyber breaches on stock prices. The major finding of this study is that the negative magnitude of the stock price reaction and the duration of the reaction are substantially different for firms disclosing their cyber breaches via an 8-K compared to firms disclosing their breaches via other sources. Our results provide support for the new cybersecurity disclosure rules issued by the Securities and Exchange Commission (2023).

The Impact of Mandatory Operating Information Disclosure on Related‐Party Transactions: Evidence From China

The Impact of Mandatory Operating Information Disclosure on Related‐Party Transactions: Evidence From China

Scope 3: what question are we trying to answer?

Once a little-scrutinized and largely optional aspect of corporate greenhouse gas emissions disclosure, Scope 3 emissions accounting and reporting is now a common element of voluntary climate best practice and is increasingly being adopted as part of new mandatory corporate climate disclosure policies. As Scope 3 disclosure becomes more central to what companies are asked (or required) to do, we perhaps should ask anew what exactly it is we are trying to accomplish. While those NGOs and other stakeholders that designed the Scope 3 framework and who have included it in highly influential corporate leadership programs were well-intentioned, it is becoming clear that the system as designed is ill-suited to serve its fundamental purpose: driving corporate actions to reduce, avoid, and remove greenhouse gas emissions. Scope 3 inventories are often seen as an end in and of themselves, yet from a climate perspective, they are only tools—and only useful if they help lead to positive emissions impact. What companies are asked to do regarding value chain emissions is not adequately aligned with what climate science demands. Therefore, greenhouse gas accounting, disclosure, and leadership programs and rules must modernize their approaches to Scope 3. Options include: limiting data collection requirements to seeking actionable, primary data; using proxy data only as a baseline from which the demonstrated impact of emissions-reducing interventions can be credited by target setting and leadership programs; and by fully embracing the use of verified market mechanisms to enable investments in positive emissions impact.

Disclosure rules, controlling shareholders, and trading activity in the new issues market

This study examines the impact of controlling shareholders’ ownership on trading activity under regimes with different disclosure rules. In regimes with ambiguous disclosure rules, trading volume and turnover are higher when controlling shareholders’ ownership is low and their control rights potentially exceed their cash flow rights. However, this impact diminishes in regimes with strict and unambiguous disclosure rules. These findings are robust to endogeneity concerns, suggesting that investor beliefs about potential agency conflicts are less heterogeneous, as evidenced by their trading behavior when disclosure rules are stringent and well defined. The results highlight the role of disclosure credibility and readability in influencing trading activity, offering new insights into the relationship between ownership structure and market behavior.

Information technologies in judicial process: opportunities of artificial intelligence in evidence system

The study is devoted to ambiguous issues of using artificial intelligence (AI) in judicial process. The purpose of the study is to present foreign experience of using information technologies in court proceedings based on the example of the most controversial and debated ideas concerning resources of artificial intelligence in the system of evidence. Special attention is paid to successful mechanisms of using AI in foreign judicial practice at the stage of evidence assessment. The study presents several decisions of foreign courts, formed with the help of AI. The findings allow to express opinion about admissibility of evidence evaluated by AI. The study employs methods of general scientific cognition and special methods including comparative legal. The dialectical method allows to investigate genesis and progressive development of judicial process technologization. The methods of analysis and synthesis, induction and deduction contribute to highlighting disadvantages of predictive coding at the proving stage and advantages of electronic research of evidence, options for simultaneous disclosure of evidence using different methods on the example of specific court decisions. The comparative legal method helps to identify best practices of using artificial intelligence in the system of evidence in foreign countries. The study not only describes the tools of predicting justice in European judicial practice, but also examines the problems of Chinese "instrumental justice" that can arise in any country. Conclusion justifies predictive coding as a tool of predictive justice, provided that general rules for information disclosure are developed and specifics of machine learning for a particular case are considered. It is noted that artificial intelligence has not yet become the predominant method in any types of legal proceedings. This may be explained by insufficient confidence in it across legal communities and time needed to form a successful history of its use for solving legally significant tasks in various spheres of human life.

The Irrelevance of Fee Structures for Certification

In models of certification, possible restrictions on the nature of the fee structures are commonly analyzed. We show that they are irrelevant for the certifier’s ability to maximize profits and trade efficiency. Our results establish that certification schemes involve two substitutable dimensions—the fee structure and the disclosure rule. In the context of a canonical unit good certification setup, these dimensions act as perfect substitutes for achieving trade efficiency and (monotone) distributions of rents; adjustments in the disclosure dimension can fully mitigate restrictions in the fee dimension, but these changes do affect market transparency. (JEL D82, D83, G24, G28)

Enhanced Compensation Disclosure and Ex Post Discretionary Adjustments of Realized Performance in Executive Incentive Contracts

ABSTRACT Recent research shows that the United States Securities and Exchange Commission’s enhanced compensation disclosures introduced in 2006 reduced boards’ flexibility in their compensation decisions and that boards immediately reacted by increasing executive pay to compensate for additional pay risk. We investigate firms’ longer-term reactions to these new disclosure rules. We find that firms often adjust realized earnings per share ex post when deciding their executives’ bonuses, and this practice has gained popularity since 2006. The use of ex post discretionary adjustments is more pronounced when boards’ demand for compensation flexibility is higher. Overall, our findings suggest that ex post discretionary adjustments are a source of flexibility that boards use to cope with limited compensation flexibility under the new compensation discussion and analysis disclosure rules. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M41; M52.

Global Financial Crisis: Unravelling Corporate Governance Failures

The global financial crisis of 2007-2008, stemming from the United States subprime mortgage crisis, was a profound and widespread calamity with far-reaching implications for economies, enterprises, and investors worldwide. This essay posits that the root cause of this crisis lies in the failure of corporate governance, asserting that the outbreak unfolded through three stages: the accumulation, amplification, and outbreak of governance risks. Crucially, the first stage reveals a convergence of internal and external governance failures, marking the conjunction of internal governance lapses—specifically in risk management, executive compensation, board operations, and information disclosure—and external governance deficiencies in government regulation, legal requirements, and social accountability. The multifaceted impact of the crisis, leading to the bankruptcy of prominent financial institutions globally and unprecedented government interventions, underscored the urgency of addressing governance issues. Scholars and researchers globally have since dissected the crisis, identifying lessons and recommending reforms. This essay examines the intricate balance between internal and external governance, emphasizing the imperative of effective interaction. Proposals for improvement include enhancing board structures, implementing substantive disclosure rules, fortifying government regulation, and fostering international cooperation. The aftermath of the crisis, while posing challenges, also presents an opportunity for corporate governance reform. The lessons learned highlight the indispensability of robust governance mechanisms in protecting investor and shareholder interests. Effectively navigating the evolving landscape requires staying abreast of contemporary needs and embracing reforms that align with the dynamic nature of global finance. Ultimately, the financial crisis underscores the pivotal role of effective corporate governance in mitigating risks, fostering sustainable development, and safeguarding societal interests.

Optimal sequential contests

I study sequential contests where the efforts of earlier players may be disclosed to later players by nature or by design. The model has many applications, including rent seeking, R&D, oligopoly, public goods provision, and tragedy of the commons. I show that information about other players' efforts increases the total effort. Thus, the total effort is maximized with full transparency and minimized with no transparency. I also show that in addition to the first‐mover advantage, there is an earlier‐mover advantage. Finally, I derive the limits for large contests and discuss the limit to perfectly competitive outcomes under different disclosure rules.

Роль обліку та звітності в системі управління економічною безпекою підприємства в кризових умовах

The role of accounting and reporting in the enterprise management system is extremely relevant in the context of martial law and special rules for accounting and disclosure in Ukraine. The accounting and reporting system has changed with the adoption of a number of regulations to regulate accounting, accounting recovery procedures, preparation and submission of financial statements for the period of martial law or state of war, as well as special requirements for accounting and reporting after the termination or abolition of martial law. The aim of the article is to study the existing problems and substantiate the prospects for the development of accounting and reporting as the main tool of the system for managing the economic security of enterprise in crisis conditions. Researching, systematizing and summarizing the scientific works of many scientists, practical approaches to the organization of accounting have been identified, including the methods of reporting under martial law in order to ensure the economic security of Ukrainian enterprises. As result of the study, scientific-theoretical and methodological approaches to the development of accounting and reporting in crisis conditions have been substantiated, namely, new directions for improving accounting methods and principles that determine the paradigm of the economic security management system under martial law, as well as taking into account current global trends in the prospects and development of accounting, based on the application of provisions of international standards that have an impact on the development of a unified accounting and information system. Proposals are made on the procedure for reflecting information in the accounting and reporting of financial indicators under the influence of emergency events related to the imposition of martial law in Ukraine, the methodology is substantiated and the procedure for disclosure of the main financial indicators in the reporting is proposed, taking into account the principles of continuity and consistency in accordance with the requirements of NAS and IFRS.

Briefs Supporting the SEC Climate-Change Disclosure Rules Committed Serious Errors

Briefs Supporting the SEC Climate-Change Disclosure Rules Committed Serious Errors

Real Effects of the Proposed SEC Climate Disclosure Rule

Real Effects of the Proposed SEC Climate Disclosure Rule

Reasons a Court Should Find that the SEC Lacked Legal Authority for the Climate-Change Disclosure Rules

Reasons a Court Should Find that the SEC Lacked Legal Authority for the Climate-Change Disclosure Rules

PENGUNGKAPAN PAJAK DI INDONESIA: SEBUAH CONTENT ANALYSIS

Many countries are starting to require tax disclosure. In Indonesia, the Mandatory Disclosure Rule (MDR) has been announced but has never been implemented. Tax disclosure is expected to be an alternative change to the Mandatory Disclosure Rule (MDR). The purpose of this study is to analyze tax disclosures made by companies in Indonesia. This research was conducted using the content analysis method to classify and measure each of Mgammal's (2019) measurement items more accurately. The results showed that 12 items were fully represented by all company samples, 13 items were presented as company samples and 6 measurement items were not presented at all by company samples. It is hoped that the implementation of tax disclosure measurements carried out in this research can become a basis for compiling relevant tax disclosure items in Indonesia.

The effect of expanded audit report on IPO underpricing: Evidence from China

This study investigates the impact of the expanded audit report on IPO underpricing. Using the sample of A-share listed firms in China from June 2014 to November 2021, we find that the expanded audit reports can reduce the speculative behavior of investors in the initial phase of IPOs, resulting in lower IPO underpricing and consecutive rising limits. The channel tests suggest that the disclosure of key audit matters reduces value uncertainty and alleviates investors' local bias. Our results are consistent to a series of robustness tests. Further analyses show that the negative relation between expanded audit reports and IPO underpricing intensifies when the legal environment is weak and firms' information transparency is low. Additional tests uncover positive market reaction after the mandatory disclosure rule in the long run. Overall, our study adds new insights to the information effects of the expanded audit reports in emerging markets.