Transparency Directive Research Articles

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.

Transparency Regulation and Stock Price Informativeness: Evidence from the European Union's Transparency Directive

ABSTRACT We examine changes in stock price informativeness following the European Union's Transparency Directive (TPD). The TPD, implemented by country between 2007 and 2009, enhanced corporate transparency through mandating regular firm financial disclosures and facilitating the dissemination of financial reports. Using stock return synchronicity as a proxy for stock price informativeness, we find that price informativeness improved following implementation of the TPD. This improvement was more pronounced in countries with strong regulatory environments than those with weak regulatory environments. We additionally examine a later amendment to the TPD that eliminated the requirement of quarterly financial disclosures and document an increase in stock return synchronicity following the amendment. Our findings support prior research suggesting that transparency regulations improve financial information. JEL Classifications: F30; G15; G30; M4. Data Availability: Data are available from the sources cited in the text.

Transparency Regulation and Stock Price Informativeness: Evidence From the European Union’s Transparency Directive

We examine changes in stock price informativeness following the European Union’s Transparency Directive (TPD). The TPD, implemented by country between 2007 and 2009, enhanced corporate transparency through mandating regular firm financial disclosures and the dissemination of financial reports. Using stock return synchronicity as a proxy for stock price informativeness, we find that price informativeness improved following implementation of the TPD. This improvement was more pronounced in countries with strong regulatory environments than those with weak regulatory environments. We also examine a later amendment to the TPD that eliminated the requirement of quarterly financial disclosures and document an increase in stock return synchronicity following the amendment, suggesting that it may have been premature from the standpoint of public information flow. Our findings support prior research suggesting that transparency regulations improve financial information. https://doi.org/10.2308/jiar-52383

The Struggle for a Common Interim Reporting Frequency Regime in Europe

This paper analyzes the effect of the Transparency Directive (TD) on interim reporting frequency in the European Union (EU). The TD defines the minimum content of annual and interim reports. In contrast to the USA, quarterly financial reporting is currently not mandatory in the EU. However, Member States and stock market operators can enact stricter local regulations. In October 2011, the Commission published a draft to modernize the TD proposing to abolish mandatory quarterly reporting across the EU. This surprising amendment is in contrast to the Commission's original intention. This article analyzes the reporting frequency regulation in the EU and the potential effect of abolishing mandatory quarterly reporting on the reporting frequency. I find that voluntary quarterly reporting is a function of firm, industry and country characteristics and, although managers are reluctant to change reporting frequency, abolishing mandatory quarterly reporting might lead to a reduction of quarterly reporting in several countries in the long run. This could have significant effects on, for instance, the information asymmetry in these countries that regulators should consider. On a more general note, given the variety of opinions on the ‘right’ interim reporting requirements in the EU, results from academic research could probably further facilitate a more fact-based debate on the issue and further research should investigate the capital market and real business effects of reporting frequency regulation in the specific EU context.

REIMBURSEMENT OF MEDICINES IN BELGIUM: ROLE OF EVIDENCE-BASED MEDICINE

The European Transparency Directive (TD) requires that pricing and reimbursement decisions must be taken in a transparent, objective and verifiable way with respect of strict timelines. The Belgian competent authority integrated on January 1st, 2002 Evidence-Based Medicine (EBM) principles in the reimbursement evaluation. The present work describes the procedures and investigates whether the introduction of the EBM principles indeed affects the decision and whether it compromised the respect of strict timelines.The reimbursement decision for all new submissions except for generic drugs is preceded by an evaluation of the relative therapeutic value. There were 1285 submissions handled within the period 2002-2004 of which 159 (12.4%) related to new molecular entities. For the 824 files with evaluation of the therapeutic value, the reimbursement decision was positive in 80.8% of cases. The percentage of positive decisions was dependent on the type of submission with the lowest percentages for new molecular entities and submissions for new indications (64%-71%). Line extensions and generics received a positive decision in nearly all cases (> 95%).Proof of added value by at least 1 positive superiority trial against active comparator is a requirement for obtaining a price premium: this was granted in less than 50% of the 67 submissions claiming such superiority and the odds for a negative reimbursement decision increased significantly if the applicant failed to prove added value: O.R. = 9.1 (2.3 – 35.6), indicating that clinical evidence of added therapeutic value clearly facilitates reimbursement.The introduction of the new procedure did not jeopardize the timelines.Introducing EBM principles had a significant impact on reimbursement decisions in Belgium by facilitating reimbursement with a price premium of new drugs with added value addressing unmet medical needs.