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Disclosure policy choices under regulatory threat

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  • Jeroen Suijs
  • Jacco L. Wielhouwer

Abstract

This article shows that firms “voluntarily” increase their disclosures in response to the threat of more stringent disclosure regulations. These disclosures are mostly just sufficient to deter regulation. However, when investment risk is low, both managers and investors might strictly prefer the regulation deterring equilibrium. We further find that in many cases, regulation can only be deterred by asymmetric disclosure behavior of the firms. This suggests that coordination issues and free‐riding may be important reasons why self‐regulation may fail. The results also indicate the importance of considering political pressure and regulatory threats to explain observed symmetric and asymmetric voluntary disclosure behavior.

Suggested Citation

  • Jeroen Suijs & Jacco L. Wielhouwer, 2019. "Disclosure policy choices under regulatory threat," RAND Journal of Economics, RAND Corporation, vol. 50(1), pages 3-28, March.
    • Handle: RePEc:bla:randje:v:50:y:2019:i:1:p:3-28
    DOI: 10.1111/1756-2171.12260
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    Cited by:

    1. Sorabh Tomar, 2023. "Greenhouse Gas Disclosure and Emissions Benchmarking," Journal of Accounting Research, Wiley Blackwell, vol. 61(2), pages 451-492, May.
    2. Mumtaheena Anwar & Sohanur Rahman & Md. Nurul Kabir, 2021. "Does national carbon pricing policy affect voluntary environmental disclosures? A global evidence," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(2), pages 211-244, April.
    3. Zheng, Zhen & Lin, Yongjia & Yu, Xiaoou & Liu, Xinming, 2021. "Product market competition and the cost of equity capital," Journal of Business Research, Elsevier, vol. 132(C), pages 1-9.
    4. Li, Guowen & Jing, Zhongbo & Li, Jingyu & Feng, Yuyao, 2023. "Drivers of risk correlation among financial institutions: A study based on a textual risk disclosure perspective," Economic Modelling, Elsevier, vol. 128(C).
    5. Baule, Rainer & Münchhalfen, Patrick & Shkel, David & Tallau, Christian, 2023. "Fair-washing in the market for structured retail products? Voluntary self-regulation versus government regulation," Journal of Banking & Finance, Elsevier, vol. 148(C).
    6. Gabriel Natividad, 2022. "Decentralizing investment: Evidence from municipal organization after close elections," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 734-761, August.
    7. Jeremy Bertomeu & Igor Vaysman & Wenjie Xue, 2021. "Voluntary versus mandatory disclosure," Review of Accounting Studies, Springer, vol. 26(2), pages 658-692, June.

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