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Increased mandated disclosure frequency and price formation: evidence from the 8-K expansion regulation

Author

Listed:
  • Jeff L. McMullin

    (Indiana University)

  • Brian P. Miller

    (Indiana University)

  • Brady J. Twedt

    (University of Oregon)

Abstract

Regulators claim that increased mandated disclosure frequency should lead to more efficient price formation. However, analytical models suggest that mandating disclosure may actually impede the price formation process, and prior empirical studies have been unable to document a relation between mandatory disclosure and improved price formation. We re-examine this relationship using a recent SEC regulation that increased the frequency of mandated event disclosures in form 8-K. We show that price formation improves after the mandate, where firms with the largest increases in mandatory disclosure experience the greatest improvements in price formation. Our evidence is consistent with the idea that mandating an increase in the frequency that material events must be disclosed is associated with improved price formation.

Suggested Citation

  • Jeff L. McMullin & Brian P. Miller & Brady J. Twedt, 2019. "Increased mandated disclosure frequency and price formation: evidence from the 8-K expansion regulation," Review of Accounting Studies, Springer, vol. 24(1), pages 1-33, March.
    • Handle: RePEc:spr:reaccs:v:24:y:2019:i:1:d:10.1007_s11142-018-9462-2
    DOI: 10.1007/s11142-018-9462-2
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    Cited by:

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    3. Khrystyna Bochkay & Stan Markov & Musa Subasi & Eric Weisbrod, 2022. "The Roles of Data Providers and Analysts in the Production, Dissemination, and Pricing of Street Earnings," Journal of Accounting Research, Wiley Blackwell, vol. 60(5), pages 1695-1740, December.
    4. Hyunkwon Cho & Robert Kim, 2021. "Asymmetric effects of voluntary disclosure on stock liquidity: evidence from 8‐K filings," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 803-846, March.
    5. Ma, Rui & Guo, Fei & Li, Dongdong, 2024. "Can public data availability affect stock price crash risk? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 94(C).
    6. Li, Xiaoyu & Zou, Lin, 2024. "Does mandating narrative disclosure of innovation help unveil the curtain of R&D expenditure? Evidence from regulation change in China," International Review of Financial Analysis, Elsevier, vol. 91(C).
    7. Charles P. Cullinan & Richard Holowczak & David Louton & Hakan Saraoglu, 2023. "Costs associated with exit or disposal activities: A topic modeling investigation of disclosure and market reaction," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 30(4), pages 173-191, October.
    8. John L. Campbell & Brady J. Twedt & Benjamin C. Whipple, 2021. "Trading Prior to the Disclosure of Material Information: Evidence from Regulation Fair Disclosure Form 8‐Ks," Contemporary Accounting Research, John Wiley & Sons, vol. 38(1), pages 412-442, March.
    9. Hope, Ole-Kristian & Huang, Zhongwei & Moldovan, Rucsandra, 2021. "Wall Street analysts as investor relations officers," Journal of Corporate Finance, Elsevier, vol. 67(C).
    10. Bayar, Onur & Das, Sougata & Kesici, Emre, 2021. "Heterogeneity in the information content of 8-K disclosures about private targets: Acquirer size and target significance," Global Finance Journal, Elsevier, vol. 48(C).
    11. Daoju Peng & Jianfu Shen & Simon Yu Kit Fung & Eddie C. M. Hui & Kwokyuen Fan, 2024. "The Valuation Effect and Consequences of Clawback Adoption in Real Estate Investment Trusts," The Journal of Real Estate Finance and Economics, Springer, vol. 68(2), pages 274-317, February.
    12. Jing He & Marlene A. Plumlee, 2020. "Measuring disclosure using 8-K filings," Review of Accounting Studies, Springer, vol. 25(3), pages 903-962, September.

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    More about this item

    Keywords

    Regulation; Mandatory disclosure; 8-K filings; Price formation;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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