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The real effect of mandatory disclosure in Japanese firms

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  • Sakawa, Hideaki
  • Watanabel, Naoki
  • Yamada, Akihiro
  • Duppati, Geeta

Abstract

This study replicates the effects of mandatory segment disclosures on corporate real investment decisions in a Japanese setting. We focus on the mandatory segment disclosure changes implemented in Japan since 2011 and find that unlike the case with US firms, these disclosures have not affected the corporate investment decisions of large Japanese firms. Mandatory segment disclosures were introduced in Japan in 2011, coinciding with Great East Japan Earthquake, explaining the subsequent increase in investments. Therefore, we estimate that, based on the learning model, Japanese mandatory disclosures might be confounded by the revelatory price efficiency crowding-out effects that led to a decrease in the corporate investment of US firms.

Suggested Citation

  • Sakawa, Hideaki & Watanabel, Naoki & Yamada, Akihiro & Duppati, Geeta, 2020. "The real effect of mandatory disclosure in Japanese firms," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:pacfin:v:60:y:2020:i:c:s0927538x19305591
    DOI: 10.1016/j.pacfin.2020.101298
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    References listed on IDEAS

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    1. Philip G. Berger & Rebecca Hann, 2003. "The Impact of SFAS No. 131 on Information and Monitoring," Journal of Accounting Research, Wiley Blackwell, vol. 41(2), pages 163-223, May.
    2. repec:oup:rfinst:v:25:y::i:11:p:3305-3350 is not listed on IDEAS
    3. Sudarshan Jayaraman & Joanna Shuang Wu, 2019. "Is Silence Golden? Real Effects of Mandatory Disclosure," Review of Financial Studies, Society for Financial Studies, vol. 32(6), pages 2225-2259.
    4. Thierry Foucault & Laurent Frésard, 2012. "Cross-Listing, Investment Sensitivity to Stock Price, and the Learning Hypothesis," The Review of Financial Studies, Society for Financial Studies, vol. 25(11), pages 3305-3350.
    5. Bai, Jennie & Philippon, Thomas & Savov, Alexi, 2016. "Have financial markets become more informative?," Journal of Financial Economics, Elsevier, vol. 122(3), pages 625-654.
    6. Christian Leuz & Peter D. Wysocki, 2016. "The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research," Journal of Accounting Research, Wiley Blackwell, vol. 54(2), pages 525-622, May.
    7. Edmans, Alex & Jayaraman, Sudarshan & Schneemeier, Jan, 2017. "The source of information in prices and investment-price sensitivity," Journal of Financial Economics, Elsevier, vol. 126(1), pages 74-96.
    8. Sakawa, Hideaki & Ubukata, Masato & Watanabel, Naoki, 2014. "Market liquidity and bank-dominated corporate governance: Evidence from Japan," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 1-11.
    9. Pingyang Gao & Pierre Jinghong Liang, 2013. "Informational Feedback, Adverse Selection, and Optimal Disclosure Policy," Journal of Accounting Research, Wiley Blackwell, vol. 51(5), pages 1133-1158, December.
    10. Young Jun Cho, 2015. "Segment Disclosure Transparency and Internal Capital Market Efficiency: Evidence from SFAS No. 131," Journal of Accounting Research, Wiley Blackwell, vol. 53(4), pages 669-723, September.
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    Cited by:

    1. Sakawa, Hideaki & Watanabel, Naoki & Yamauchi, Shohei & Liu, Runxi, 2023. "The effect of Tobin's q on investment in a bank-based financial system: Evidence from Japan," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).

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