IDEAS home Printed from https://ideas.repec.org/a/eee/bracre/v55y2023i6s0890838923000045.html
   My bibliography  Save this article

The market response to mandatory disclosure of payments to foreign governments

Author

Listed:
  • Elayan, Fayez A.
  • Pacharn, Parunchana
  • Li, Jennifer
  • Brown, Kareen
  • Chen, Yijia

Abstract

This study examines how the equity market responds to the mandated disclosures made under the Canadian Extractive Sector Transparency Measures Act (ESTMA). We studied a sample of 1,559 company-year-country disclosures from 937 extractive firms listed, or conducting business, in Canada between 2016 and 2018, and controlled for corruption perception and bribe indices in the host country. We found that ESTMA disclosures are associated with a negative market reaction, implying that the market perceives a net loss to firms as a result of the costs of compliance and risks associated with ESTMA. It appears that the reaction is stronger and more negative for ESTMA reports that provide more information, as well as for firms that report higher payments than expected. Furthermore, we have found that the ESTMA disclosures garner a stronger market reaction for firms that are more prone to corruption or have weak governance. This study contributes to the important discussion regarding the use of transparency measures to address the issues related to human rights in the business environment. Our results confirm that transparency is costly for shareholders, and it is, therefore, important for policymakers to consider the costs, benefits, and potential unintended consequences of their measures.

Suggested Citation

  • Elayan, Fayez A. & Pacharn, Parunchana & Li, Jennifer & Brown, Kareen & Chen, Yijia, 2023. "The market response to mandatory disclosure of payments to foreign governments," The British Accounting Review, Elsevier, vol. 55(6).
    • Handle: RePEc:eee:bracre:v:55:y:2023:i:6:s0890838923000045
    DOI: 10.1016/j.bar.2023.101177
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0890838923000045
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.bar.2023.101177?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:bracre:v:55:y:2023:i:6:s0890838923000045. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/the-british-accounting-review .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.