The Commitment Effect versus Information Effect of Disclosure-Evidence from Smaller Reporting Companies

• 成果类型: Article
• 署名作者: Cheng, Lin; Liao, Scott; Zhang, Haiwen
• 署名单位: University of Arizona; University of Toronto; University System of Ohio; Ohio State University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-50416
• 发表日期: 2013
• 页码: 1239-1263
• 关键词: economic consequences; capital-markets; cost; liquidity; IMPACT

摘要

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 that are 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.