Monitoring and corporate disclosure: Evidence from a natural experiment

• 成果类型: Article
• 署名作者: Irani, Rustom M.; Oesch, David
• 署名单位: University of Illinois System; University of Illinois Urbana-Champaign; University of St Gallen
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.02.021
• 发表日期: 2013
• 页码: 398-418
• 关键词: Analyst coverage; corporate governance; Reporting decisions

摘要

Using an experimental design that exploits exogenous reductions in coverage resulting from brokerage house mergers, we find that a reduction in coverage causes a deterioration in financial reporting quality. The effect of coverage on disclosure is more pronounced for firms with weak shareholder rights, consistent with a substitution effect between analyst monitoring and other corporate governance mechanisms. The effects we uncover using our experimental design are an order of magnitude larger than estimates from ordinary least squares regressions that do not account for the endogeneity of coverage. Overall, our results suggest that security analysts monitor managers and entrenched managers adopt less informative disclosure policies in the absence of such scrutiny. (C) 2013 Elsevier B.V. All rights reserved.