Voluntary Disclosure and Information Asymmetry: Evidence from the 2005 Securities Offering Reform: VOLUNTARY DISCLOSURE AND INFORMATION ASYMMETRY

By Nemit Shroff, Amy X. Sun, Halbert White, Weining Zhang. 2013

211 citations recorded by the source corpus.

In 2005, the SEC enacted the Securities Offering Reform (Reform), which relaxes ‘gun jumping’ restrictions, thereby allowing firms to more freely disclose information before equity offerings. We examine the effect of the Reform on voluntary disclosure behavior before equity offerings and the associated economic consequences. We find that firms provide significantly more preoffering disclosures after the Reform. Further, we find that these pre-offering disclosures are associated with a decrease in information asymmetry and a reduction in the cost of raising equity capital. Our findings not only inform the debate on the market effect of the Reform, but also speak to the literature on the relation between voluntary disclosure and information asymmetry by examining the effect of quasi-exogenous changes in voluntary disclosure on information asymmetry, and thus a firm’s cost of capital. JEL Classification: G14; M41

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/1e86cf6584375dbaad125cfb549b8aa897748033

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Citations in the corpus

The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research (2015, unknown): “The link between disclosure and the cost of capital is also further corroborated by studies exploiting mandatory changes in disclosure and reporting (e.g., Shroff et al., 2013).”
Investor Relations and Information Assimilation (2018, background): “First, we contribute to the large literature that focuses on the role of disclosure (Leuz and Verrecchia 2000; Shroff et al. 2013) and dissemination (Bushee et al. 2010; Blankespoor et al. 2013; Twedt 2016) in reducing information asymmetry and improving market efficiency.”
Mitigating information asymmetry through sustainability assurance: The role of accountants and levels of assurance (2017, background): “In relation to voluntary disclosure and subsequent assurance demand, it argues the need for organizations to interact with a broad set of stakeholders to ensure their long-term survival through the so-called “social contract” between the firm and society (Deegan, Cooper, & Shelly, 2006); as Ullman (”