Real effects of disclosure regulation

Corporate disclosure regulation traditionally intends to enhance firms’ information environments, render capital markets more efficient, and improve resource allocation. Recent years have brought many examples of additional or tightening disclosure requirements – but also some rare instances of de-regulation. However, some of these new regulatory initiatives appear different in two important respects:

First, some address the needs of audiences other than capital market participants. For example, corporate social responsibility reporting targets NGOs, consumers, and the public at large.

Second, several recent initiatives appear motivated by policy objectives other than increasing transparency or comparability. Rather, they create strong incentives for firms to change non-disclosure aspects of their operating, investing and financing policies. This new type of disclosure regulation is interesting because its “real” (i.e., non-disclosure) consequences are not unintended “side effects”, but are (sometimes explicitly) their main purpose. (Also, some of these regulatory initiatives are local or regional, and therefore likely to be understudied.)

Some such regulations include:

• Corporate social responsibility (CSR) reporting, Integrated Reporting, environmental and sustainability reporting, other forms of non-financial disclosure
• Country-by-country reporting of key financial information to tax authorities
• Disclosure of payments made by oil and gas extraction firms to governments
• Reporting of top management compensation details and CEO pay ratios
• Alternative Performance Measures
• Abolishment of quarterly reporting requirements in the EU
• New International Financial Reporting Standards (IFRSs)
• The International Accounting Standards Board’s (IASB) Disclosure Initiative
• Regulatory disclosure requirements for financial institutions and insurance firms (e.g., outcomes of stress tests, quantitative impact studies and asset quality reviews).

Is anybody working on projects that address these types of questions? Looking forward to discussing related work, or getting links to papers of yours.

For those of you working in this area, let me highlight a current Call for Papers from the German association journal "Schmalenbach Business Review" (SBR). Download it here.