Topic: Externalities of Disclosure Regulation: The Case of Regulation FD
Presenter：Prof. KE Bin, professor in accounting, Nanyang Technological University
Time: May 13, 2011（Friday）3:00—4:30PM
Venue: Room 501, Jiageng Bld 2
Chair：Jun Ruan, assistant professor in finance, IFAS
Abstract：
We use Regulation Fair Disclosure (REG FD) to examine a relatively neglected but important effect of disclosure regulation: externalities. REG FD applies to all publicly traded U.S. firms, but foreign firms cross-listed on U.S. stock exchanges are explicitly exempt. Despite the exemption, we find that many cross-listed firms voluntarily adopt REG FD as part of their disclosure policies. We hypothesize that REG FD imposes two externalities on cross-listed firms. First, following REG FD previously disadvantaged U.S. investors have a lower demand for shares of cross-listed firms that continue to follow a selective disclosure policy. Second, REG FD creates an information spillover effect on cross-listed firms whose values and cash flows are correlated with those of U.S. firms. We find evidence of both effects in cross-listed firms’ voluntary REG FD adoption decisions. Further, relative to non-adopters, cross-listed firms who voluntarily adopt REG FD exhibit a significant reduction in the information asymmetry component of cost of capital. REG FD adopters are also more likely than non-adopters to switch to open disclosure post REG FD. These results suggest that cross-listed firms’ voluntary REG FD adoption represents a credible commitment to increased disclosure transparency.
Presenter Introduction：
Professor Ke Bin obtained his MS from Pennsylvania State University and PhD from Michigan State University. His research interests include financial reporting and disclosure, insider trading, institutional investors, financial analysts, corporate governance, and taxes. His teaching interests include financial accounting, financial statement analysis and US Federal income taxation. He has published in top journals including The Accounting Review, Journal of Accounting Research, Review of Accounting Studies, Contemporary Accounting Research and Journal of Accounting and Economics.
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