Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments

By Michael Greenstone, Paul D. Oyer, Annette Vissing-Jorgensen. 2005

326 citations recorded by the source corpus.

Author(s): Greenstone, Michael; Oyer, Paul E; Vissing-Jorgensen, Annette | Abstract: The 1964 Securities Acts Amendments extended the mandatory disclosure requirements that had applied to listed firms since 1934 to large firms traded Over-the-Counter (OTC). We find several pieces of evidence indicating that investors valued these disclosure requirements, two of which are particularly striking. First, a firm-level event study reveals that the OTC firms most affected by the 1964 Amendments had abnormal excess returns of about 3.5 percent in the weeks immediately surrounding the announcement that they had begun to comply with the new requirements. Second, we estimate that the most affected OTC firms had abnormal excess returns ranging between 11.5 and 22.1 percent in the period between when the legislation was initially proposed and when it went into force. These returns are adjusted for the standard four factors and are relative to NYSE/AMEX firms, matched on size and book-to-market equity, that were unaffected by the legislation. While we cannot determine how much of shareholders' gains were a transfer from insiders of these same companies, our results suggest that mandatory disclosure causes managers to focus more narrowly on maximizing shareholder value.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/30af50ed43aaf44a5b038d5def946975877894b3

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Citations in the corpus

How Firms Respond to Mandatory Information Disclosure (2012, unknown): “Greenwood et al. (2010) find more geographically concentrated firms, which are more closely tied to their region’s interests, to be less likely to pursue downsizing strategies.”
Capital-Market Effects of Securities Regulation: Prior Conditions, Implementation, and Enforcement (2016, background): “Only a few studies provide causal estimates for the effects of securities regulation, but they are typically limited to specific market segments (e.g., smaller over-the-counter firms) or samples around a narrow size threshold (e.g., Greenstone, Oyer, and Vissing-Jorgensen 2006; Iliev 2009).”
Economic Consequences of SEC Disclosure Regulation: Evidence from the OTC Bulletin Board (2005, unknown): “…ownership limit appears to be quite restrictive, the rule refers only to ‘‘owners of record’’ and not the number of ARTICLE IN PRESS 4 Recent work by Greenstone et al. (2003) examines the 1964 Securities Acts Amendments and documents positive abnormal stock returns for affected firms, which…”
Shock-Based Causal Inference in Corporate Finance and Accounting Research (2015, methodology): “Two papers impute observations missing due to attrition using data from similar surviving firms (Dinc, 2005; Greenstone et al., 2006).”
Post-listing performance and private sector regulation: The experience of London's Alternative Investment Market $ (2013, unknown): “Using short event windows, Greenstone et al. (2006) document positive returns for firms most affected by the 1964 amendments to the Securities Act, and Bushee and Leuz (2005) document positive returns and increases in liquidity for firms newly compliant with the 1999 requirement that OTCBB firms 9…”
Economic Consequences of Financial Reporting and Disclosure Regulation: A Review and Suggestions for Future Research (2008, unknown): “In a concurrent study, Greenstone et al. (2006) also find positive abnormal stock returns to firms affected by the 1964 Securities Acts Amendments.”
The Law and Economics of Self-Dealing (2008, unknown): “Interestingly, the regulation of self-dealing in the U.S. and France departs in important ways from the patterns of their respective legal families.”
Economic Consequences of the Sarbanes-Oxley Act of 2002 (2007, unknown): “Greenstone et al. (2006) further argue that as private contracts cannot prevent all expropriations of firm profits by insiders, regulations can increase the expected penalties for expropriation and thereby reduce misbehaviors and increase shareholder value. In other words, if the exposed accounting ”
The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China (2017, unknown): “This finding also underscores the different effects of mandated CSR versus financial disclosure on firm value, as prior studies suggest that mandatory financial disclosure increases firm value and decreases agency conflicts ( Greenstone et al., 2006; Hope and Thomas, 2008 ).”