Effect Of Mandatory Disclosure Research Articles

Disclosure regulation, cost of capital, and firm values

This paper shows that mandating some firms to disclose more while leaving other firms disclosing voluntarily is less effective in improving and may even harm the overall information environment when firms' disclosures are endogenous. Although the regulated firms' increased disclosure directly reduces all firms' cost of capital, it crowds out the unregulated firms' voluntary disclosure and thus increases all firms’ cost of capital indirectly. Under certain circumstances, the negative indirect effect can outweigh the direct benefit. These results are consistent with the scant evidence on the cost-of-capital effect of mandatory disclosure. The model highlights the importance of the market-wide effects of disclosure regulation and facilitates quantitative cost-benefit analyses for specific regulatory proposals.

The Effect of Mandatory Disclosure on Shareholder Wealth: Evidence from FASB Statement No. 14 and ASC 280 Financial disclosures

Financial disclosures either mandatory or voluntary are essential in reducing information asymmetry between management and users of financial reports of corporations. We investigate the market’s assessment of the economic effect of geographic segment data reported under ASC 280. Specifically, this paper examines the market valuation of reported foreign assets and sales prior to and post the issuance of ASC 280. In comparing the pricing of foreign assets and foreign sales, we find that both are priced with foreign sales having greater capitalization. These results persist after controlling for other determinants and factors affecting firm value. The findings suggest that the disclosure mandated by ASC 280 enhances overall disclosure related to foreign operations and as a result makes it easier for investors to assess the value of foreign operations. These findings are consistent with management’s disclosure of improved segment information under ASC 280 and provide policy, practice, and research implications for segment reporting as well as other mandatory disclosures.

The Effects of Mandatory Disclosure on Investment Efficiency

The Effects of Mandatory Disclosure on Investment Efficiency

Is there any heterogeneous impact of mandatory disclosure on corporate social responsibility dimensions? Evidence from a quasi-natural experiment in China

<abstract> <p>The corporate social responsibility (CSR) report is an important carrier of non-financial information disclosure of enterprises and an important bridge of communication between enterprises and interested parties. Compulsory disclosure has promoted the improvement of CSR levels to some extent. While, for interested parties, their attention to various dimensions of CSR has significant differences, which leads to the heterogeneous impact of mandatory disclosure policy on its different dimensions. Through regression discontinuity design model (RDD), as well as using quasi-natural experiments of Chinese mandatory disclosure policies issued in 2008, we are going to get the following conclusions by analyzing the heterogeneous impact of mandatory disclosure on CSR with the environment (CER), social (SOC) and economic (ECO) three-dimension on the basis of verifying that mandatory disclosure policy has a positive impact on CSR. (1) The effects of mandatory disclosure on the three dimensions of CSR are heterogeneous, that is, the significant effects and directions are significantly different in the three dimensions. (2) The heterogeneity of mandatory disclosure on CSR is reflected in the changing trend, and there is no significant difference at the turning point of the trend. (3) The heterogeneity of the impact mechanism of mandatory disclosure on CSR is reflected in the different mediating variables of policy on different dimensions impact, that is, the mediating variables of CER and ECO are the environmental disclosure information and return on assets. (4) The impact of mandatory disclosure on different dimensions of CSR is heterogeneous when the nature of industries and property rights are different.</p> </abstract>

The Effect of Mandatory Disclosure on Market Inefficiencies: Evidence from FASB Statement No. 161

ABSTRACTPrior research finds that unrealized gains/losses on cash flow hedges are negatively associated with future earnings, and that investors and analysts fail to anticipate this association. These studies speculate that this mispricing is due to either poor derivatives disclosures or the accounting model for cash flow hedges. We examine whether enhanced mandatory derivatives disclosures set forth in FAS 161 improve users' understanding of firms' hedging activities and offer three main findings. First, we find that this mispricing does not persist after FAS 161. Second, we find that the correction of mispricing is greatest when disclosure might help investors most. Finally, we find that analyst forecast accuracy improves after FAS 161. Overall, our results suggest that the enhanced mandatory derivative disclosures required by FAS 161 improved users' understanding of the effects of derivative and hedging activities on future firm performance and firm value—and consequently mitigated investor mispricing.

The Effect of Mandatory Disclosure on Market Inefficiencies: Evidence from Statement of Financial Accounting Standard Number 161

Prior research finds that unrealized gains/losses on cash flow hedges are negatively associated with future earnings, and that investors and analysts fail to anticipate this association. These studies speculate that this mispricing is due to either poor derivatives disclosures or the accounting model for cash flow hedges. We examine whether enhanced mandatory derivatives disclosures set forth in FAS 161 improve users’ understanding of firms’ hedging activities and offer three main findings. First, we find that this mispricing does not persist after FAS 161. Second, we find that the correction of mispricing is greatest when disclosure might help investors most. Finally, we find that analyst forecast accuracy improves after FAS 161. Overall, our results suggest that the enhanced mandatory derivative disclosures required by FAS 161 improved users’ understanding of the effects of derivative and hedging activities on future firm performance and firm value – and consequently mitigated investor mispricing.

The Changes of Disclosure in Compliance with the New Regulations in Jordan

The study investigates the differences in the disclosure practices (mandatory and voluntary) for 60 Jordanian companies listed in Amman Stock Exchange (ASE), before the regulations (1996) and after (2003). The evaluation is conducted using the mandatory and voluntary indices. Furthermore, the relationship between mandatory and voluntary disclosure will be tested in order to determine the effect of mandatory disclosure on the level of voluntary disclosure. The study adopted a sequential explanatory triangulation design which incorporated both quantitative and qualitative data collection and analysis. Various statistical techniques (e.g. paired sample t-test and Wilcoxon signed rank test) were employed using a matched pairs sample (60 companies) in 1996 and 2003. The results indicate that there was a significant increase in the level of mandatory disclosure for Jordanian companies in 2003 compared with 1996. However, the level of voluntary disclosure did not differ significantly for Jordanian companies in the periods, 1996 and 2003. In addition, the findings revealed a significant positive association between mandatory and voluntary disclosure for Jordanian companies. Thus, it could be concluded that the new regulations affect positively the level of voluntary disclosure. Finally, the interview results suggested that extensive regulation may improve the level of disclosure, with the provision that too many regulations could be a burden or source of confusion for companies.

The Effect of Mandatory Disclosure on Open-Market Repurchases

Publicly traded companies distribute cash to shareholders either through dividends or through anonymous repurchases of the companies' own stock on the open market. Companies must announce a repurchase authorization but do not actually have to repurchase any stock, and until recently companies did not have to disclose whether or not they were in fact repurchasing any stock. Scholars and regulators noticed that companies frequently announced repurchases but then appeared not to complete them. They feared that such announcements might be used by insiders to exploit public investors. To reduce opportunities for exploitive behavior, the SEC required that companies disclose their repurchase activity in their quarterly filings beginning in January 2004. This Article tracks 365 repurchase programs announced in 2004 and finds that, since the SEC disclosure requirement went into effect, companies are more likely to complete their announced repurchases and do so within a shorter time period after the repurchase announcement. Michael Simkovic will be a professor at Seton Hall Law School starting in Fall 2010. He authored this article as a John M. Olin Fellow in Law and Economics at Harvard Law School. He thanks the School's John M. Olin Center for Law, Economics, and Business for its generous support. He also thanks his faculty advisor, Guhan Subramanian, for his guidance. Finally, he thanks his research assistants, Victoria Salisbury, Laura Dauban, Ian J. Pohl, Yifei Chen, Joshua Reilly, and Winnie Nip for their assistance gathering and coding data. The views expressed are those of Michael Simkovic and do not reflect the views of Harvard Law School, the Olin Center, or any other organization. Email: msimkovic@gmail.com. Mobile Phone: 516-423-9187. Effect of Mandatory Disclosure on Open-Market Stock Repurchases