Download or read book The Effect of Mandatory Disclosure on Market Inefficiencies written by John L. Campbell and published by . This book was released on 2020 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book More Than You Wanted to Know written by Omri Ben-Shahar and published by Princeton University Press. This book was released on 2014-04-20 with total page 239 pages. Available in PDF, EPUB and Kindle. Book excerpt: How mandated disclosure took over the regulatory landscape—and why it failed Perhaps no kind of regulation is more common or less useful than mandated disclosure—requiring one party to a transaction to give the other information. It is the iTunes terms you assent to, the doctor's consent form you sign, the pile of papers you get with your mortgage. Reading the terms, the form, and the papers is supposed to equip you to choose your purchase, your treatment, and your loan well. More Than You Wanted to Know surveys the evidence and finds that mandated disclosure rarely works. But how could it? Who reads these disclosures? Who understands them? Who uses them to make better choices? Omri Ben-Shahar and Carl Schneider put the regulatory problem in human terms. Most people find disclosures complex, obscure, and dull. Most people make choices by stripping information away, not layering it on. Most people find they can safely ignore most disclosures and that they lack the literacy to analyze them anyway. And so many disclosures are mandated that nobody could heed them all. Nor can all this be changed by simpler forms in plainer English, since complex things cannot be made simple by better writing. Furthermore, disclosure is a lawmakers' panacea, so they keep issuing new mandates and expanding old ones, often instead of taking on the hard work of writing regulations with bite. Timely and provocative, More Than You Wanted to Know takes on the form of regulation we encounter daily and asks why we must encounter it at all.
Download or read book The Effect of Product Market Competition on Mandatory Disclosure Strategy written by Hanyong Chung and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines how product market competition affects firms' mandatory disclosure strategies. Using the information in the SEC comment letters, I observe that firms in a highly competitive market are more likely to file unaudited mandatory disclosures with deficiency. I also find that firms facing higher competition from potential entrants tend to bundle positive (negative) mandatory items with the negative (positive) management earnings forecasts. These findings support my conjecture that firms exercise discretion in the mandatory disclosure through less transparent ways, due to a proprietary cost resulting from market competition. Additional analyses demonstrate a positive economic consequence of such disclosure strategy, and the relationship between market competition and mandatory disclosure strategies is stronger for industry followers than for industry leaders.
Download or read book Mandatory Non financial Risk Related Disclosure written by Stefania Veltri and published by Springer Nature. This book was released on 2020-07-31 with total page 176 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book focuses on the impact of the disclosure of non-financial risk, which could be seen as the most relevant non-financial information (NFI), in the aftermath of the 2014/95/EU Directive. The author analyses whether the switch from voluntary to mandatory NFI enhance the quality of disclosed NF risk-related information and the usefulness of the risk disclosure for investors. The book focuses specifically on the mandatory disclosure of non-financial (NF) risks as required by the EU Directive for listed Italian companies, investigating both the state of art of its disclosure and its usefulness for investors. In doing so, the book contributes to fill two relevant gaps in risk literature. The first research gap is related to the insufficient investigation of the disclosure of NF risks. Companies mandated to disclose risk-related information focused mainly on financial risks, in spite of the width of the definition of risk, conceived as information about any opportunity, danger, threat, or exposure that has or could impact the company in the future. The second gap is that empirical evidence about the effects of corporate risk disclosures is still limited, and the potential benefits of the disclosure of information on risks have not been fully explored. In particular, the relationship between risk disclosures and firm value is under researched, as the risk literature mainly focuses on the incentives question, related to the motives for which companies decide to disclose. The research in this book focuses on Italy, a country that provides a unique opportunity to examine the impact of mandatory NF risk disclosure on firm market value, being one of the biggest industrial European countries that had not mandatory legislation for NFI disclosure, and also one of the leading countries in voluntary corporate social responsibility (CSR) reporting at an international level. It has been carried out in the fiscal year 2017, the first year of the application of the mandatory NF disclosure for obliged Italian listed PIEs. The book contributes both to the measurement literature, as it presents a self-constructed quality NF risks and to the value relevance analysis literature, providing evidence of the usefulness of financial and non-financial risk-related disclosures in the Italian context.
Download or read book Accounting Disclosure and Real Effects written by Chandra Kanodia and published by Now Publishers Inc. This book was released on 2007 with total page 105 pages. Available in PDF, EPUB and Kindle. Book excerpt: Kanodia presents a new approach to the study of accounting measurement that argues that how firms' economic transactions, earnings, and capital flows are measured and reported to the capital markets has substantial effects on the firms' real decisions and on the allocation of resources.
Download or read book The Commitment Effect Versus Information Effect of Disclosure Evidence from Smaller Reporting Companies written by Lin Cheng and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the commitment effect provided by mandatory disclosure and the information effect of voluntary disclosure on market illiquidity by exploring a regulatory change that allows smaller reporting companies to reduce the disclosure of certain information in their SEC filings. This regime change allows us to separate the commitment effect provided by mandatory disclosure from the information effect of voluntary disclosure. We find that firms eligible to reduce their disclosure, but voluntarily maintain their disclosure level experience an increase in market illiquidity. We also find that the increase in illiquidity is more pronounced for firms with higher agency costs. These findings suggest that mandatory disclosure serves as a credible commitment mechanism and that losing such commitment by disclosure deregulation is costly in the absence of a loss of information. Our study suggests that while voluntary disclosure is effective in reducing information asymmetry, it cannot replace mandatory disclosure in addressing information problems.
Download or read book The Logic of Securities Law written by Nicholas L. Georgakopoulos and published by Cambridge University Press. This book was released on 2017-05-04 with total page 215 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book opens with a simple introduction to financial markets, attempting to understand the action and the players of Wall Street by comparing them to the action and the players of main street. Firstly, it explores the definition of a security by its function, the departure from the buyer beware environment of corporate law and the entrance into the seller disclose environment of securities law. Secondly, it shows that the cost of disclosure rules is justified by their capacity to combat irrationalities, fads, and panics. The third section explains how the structure of class actions is designed to improve deterrence. Next it explores the economic harm from insider trading and how the law fights it. In sum, the book shows how all these parts of securities law serve the virtuous cycle from liquidity to accurate prices and more trading and how the great recession showed that our securities regulation reacted mostly adequately to the crisis.
Download or read book Model Rules of Professional Conduct written by American Bar Association. House of Delegates and published by American Bar Association. This book was released on 2007 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Model Rules of Professional Conduct provides an up-to-date resource for information on legal ethics. Federal, state and local courts in all jurisdictions look to the Rules for guidance in solving lawyer malpractice cases, disciplinary actions, disqualification issues, sanctions questions and much more. In this volume, black-letter Rules of Professional Conduct are followed by numbered Comments that explain each Rule's purpose and provide suggestions for its practical application. The Rules will help you identify proper conduct in a variety of given situations, review those instances where discretionary action is possible, and define the nature of the relationship between you and your clients, colleagues and the courts.
Download or read book Effects of Mandatory Energy Efficiency Disclosure in Housing Markets written by Erica Myers and published by . This book was released on 2019 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mandatory disclosure policies are increasingly prevalent despite sparse evidence that they improve market outcomes. We study the effects of requiring home sellers to provide buyers with certified audits of residential energy efficiency. Using similar nearby homes as a comparison group, we find this requirement increases price capitalization of energy efficiency and encourages energy-saving residential investments. We present additional evidence characterizing the market failure as symmetrically incomplete information, which is ameliorated by government intervention. More generally, we formalize and provide empirical support for seller ignorance as a motivation for disclosure policies in markets with bilaterally incomplete information about quality.
Download or read book A Behavioral Economic Analysis of Mandatory Disclosure written by Stephen M. Bainbridge and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mandatory disclosure is a defining characteristic of U.S. securities regulation. Issuers selling securities in a public offering must file a registration statement with the SEC containing detailed disclosures, and thereafter comply with the periodic disclosure regime. This regime has been highly controversial among legal academics. Some scholars argue market forces will produce optimal levels of disclosure in a regime of voluntary disclosure, while others argue that various market failures necessitate a legal mandatory disclosure system. To date, however, both sides in this debate have assumed, inter alia, that market actors rationally pursue wealth maximization goals. In contrast, this paper draws on the emergent behavioral economics literature to ask whether systematic departures from rationality, such as herd behavior or the status quo bias, might result in a capital market failure. The paper concludes that such a market failure could occur, especially in emerging markets, but also contends that one should not jump to the conclusion that legal intervention in the form of a mandatory disclosure system is necessary, especially insofar as the highly evolved U.S. capital markets are concerned. The paper concludes with a cautionary note against the potential for behavioral economics to be glibly invoked as a justification for government intervention.
Download or read book The Effect of Exemption from Mandatory Disclosure to the IRS on Firm Value and Firm Behavior written by Norman Anthony Massel and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Mandatory Disclosure written by Christopher R. Yukins and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the U.S. defense procurement market, regulators require contractors to make “mandatory disclosures” if principals at those firms determine, after due review, that there is credible evidence that the firms engaged in certain crimes (fraud, bribery or gratuities), civil fraud, or significant overpayment by the government. Failure to make such a mandatory disclosure, required by clause and by regulation, can lead to (among other things) the debarment of the contractor -- a potentially devastating result. Mandatory disclosure is a natural extension of a separate requirement, that contractors maintain effective corporate compliance and ethics systems, and the Defense Department's largest prime contractors, with sophisticated compliance systems in place, have been able to accommodate the mandatory disclosure requirement. This paper asks whether this disclosure requirement in effect favors those largest contractors, and decreases competition in a already highly concentrated defense market, either by creating substantial legal risks for firms too small or inexperienced to institute effective compliance and disclosure systems, or by discouraging competition from other companies in the commercial sector. The paper concludes that the mandatory disclosure rule can impair competition in defense procurement, and recommends that regulators carefully shape any disclosure requirements, and perhaps reconsider relying on voluntary disclosure, mindful of the need to reduce costs and enhance competition in defense procurement markets.
Download or read book Fair Value Measurements Disclosure Mandatory Adoption Valuation and Disclosure Effects written by Joseph Denard Reid and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent financial crisis caused fair value relevancy and appropriateness to be called to the forefront of academic research as the subject dominated the media headlines. To date, there is limited research available to adequately understand, interpret and evaluate the benefits and consequences of fair value valuation and related disclosures within a liquid market context. This three paper dissertation contributes to academic literature by providing some evidence of the effects of mandatory disclosure surrounding fair value in an illiquid or highly volatile market. The first paper examines the relationship between mandatory disclosure, implied cost of capital and financial reporting quality. The second paper investigates the effect of the disclosure on liquidity and firm value. Lastly, the third and final paper examines the manufacturing industry sector, an industry severely affected by the financial crisis as it relates to ASC 820-10 and financial reporting quality. Collectively the results indicate that the mandatory disclosure requirement did reduce information asymmetry and provided informational value, however not uniformly for all firms. Furthermore, certain industries experienced more benefit from the disclosure. The results of this study will benefit investors, regulators, auditors and creditors as this information contained in the disclosure can serve as a signal of financial prudence. .
Download or read book Is Silence Golden Real Effects of Mandatory Disclosure written by Sudarshan Jayaraman and published by . This book was released on 2018 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: While mandatory disclosure provides benefits, it also entails costs. One such cost concerns managerial learning - by discouraging informed trading, disclosure could reduce managers' ability to glean decision-relevant information from prices. Using mandatory segment reporting in the U.S., we uncover a reduction in investment-q sensitivity, indicating lower investment efficiency after regulation. Consistent with learning, the lower sensitivity is concentrated in firms with more informed trading and lower financing constraints. Constrained firms exhibit no change in investment-q sensitivity, suggesting that they enjoy countervailing benefits via greater financing and stronger governance. Overall, we document a novel link between mandatory disclosure and real effects.
Download or read book Mandatory Disclosure as a Solution to Agency Problems written by Paul Gerard Mahoney and published by . This book was released on 1994 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Mandatory Vs Voluntary Disclosure in Markets with Informed and Uninformed Customers written by Michael J. Fishman and published by . This book was released on 1997 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Numerous rules mandate the disclosure of information. This article analyzes why such rules are enacted. Specifically, 1) why wouldn't firms voluntarily disclose their private information; and 2) given that voluntary disclosure would not be forthcoming, who has the incentive to lobby for mandatory disclosure rules? Previous analyses of disclosure assume that all customers understand the disclosures that can be made. A key result in these analyses is that there is no role for mandatory disclosure. Either voluntary disclosure is forthcoming or if it is not, no one is better off with mandatory disclosure. We analyze a market in which not all customers understand the disclosures that can be made. We show that if the fraction of customers who would understand a firm's disclosure is too low, then voluntary disclosure may not be forthcoming. In this case, mandatory disclosure benefits some (possibly all) customers and may also benefit firms. Thus we identify a motive for someone to lobby for such rules. Our results suggest that we should find mandatory disclosure rules with regard to information that is relatively difficult to understand.
Download or read book Mandatory Corporate Disclosure Rules and Securities Regulation written by Mark Blair and published by . This book was released on 2006 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this paper is to provide a critical appraisal of the rationales for mandatory corporate disclosure rules. Following preliminary observations concerning voluntary disclosure, the authors commence the main discussion with an examination of various rationales for mandatory disclosure requirements based upon market failure. These rationales include protection of ill-informed investors, reduction of social waste, and monitoring of management. This is followed by an analysis of mandatory disclosure rules based upon public choice theory. Finally, the authors examine the efficient markets debate and consider the implications of this debate for securities regulation.
