IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Mandatory Disclosure and Stock Returns: Evidence from the Over-the-Counter Market

  • Allen Ferrell
Registered author(s):

    Mandatory disclosure requirements placed on publicly traded firms constitute the core of U.S. securities regulation. Despite their importance, few empirical studies have been done on the impact of mandatory disclosure requirements on the capital markets. Using a unique database created for this study, this paper examines the impact of the 1964 imposition of mandatory disclosure requirements on the over-the-counter (OTC) market in terms of volatility and stock returns. The effect of the 1964 regulatory change has never been examined prior to this paper, despite its being the only fundamental change in disclosure regulation since the original 1930s securities acts. This study finds that mandatory disclosure is associated with both a dramatic reduction in the volatility of OTC stock returns and with OTC stocks enjoying positive abnormal returns.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://dx.doi.org/10.1086/511898
    Download Restriction: Access to the online full text or PDF requires a subscription.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by University of Chicago Press in its journal The Journal of Legal Studies.

    Volume (Year): 36 (2007)
    Issue (Month): 2 (06)
    Pages: 213-251

    as
    in new window

    Handle: RePEc:ucp:jlstud:v:36:y:2007:p:213-251
    DOI: 10.1086/511898
    Contact details of provider: Web page: http://www.journals.uchicago.edu/JLS/

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, . "What Works in Securities Laws?," Working Paper 19491, Harvard University OpenScholar.
    2. John M. Griffin & Michael L. Lemmon, 2002. "Book-to-Market Equity, Distress Risk, and Stock Returns," Journal of Finance, American Finance Association, vol. 57(5), pages 2317-2336, October.
    3. LeRoy, Stephen F & Porter, Richard D, 1981. "The Present-Value Relation: Tests Based on Implied Variance Bounds," Econometrica, Econometric Society, vol. 49(3), pages 555-74, May.
    4. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
    5. Andrei Shleifer & Daniel Wolfenson, 2000. "Investor Protection and Equity Markets," NBER Working Papers 7974, National Bureau of Economic Research, Inc.
    6. Greenstone, Michael & Oyer, Paul & Vissing-Jorgensen, Annette, 2005. "Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments," Research Papers 1869r, Stanford University, Graduate School of Business.
    7. West, Kenneth D, 1988. "Dividend Innovations and Stock Price Volatility," Econometrica, Econometric Society, vol. 56(1), pages 37-61, January.
    8. Art Durnev & Randall Morck & Bernard Yeung, 2004. "Value-Enhancing Capital Budgeting and Firm-specific Stock Return Variation," Journal of Finance, American Finance Association, vol. 59(1), pages 65-105, 02.
    9. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    10. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June.
    11. Jeffrey Wurgler, 1999. "Financial Markets And The Allocation Of Capital," Yale School of Management Working Papers ysm123, Yale School of Management, revised 01 Mar 2001.
    12. Benston, George J, 1973. "Required Disclosure and the Stock Market: An Evaluation of the Securities Exchange Act of 1934," American Economic Review, American Economic Association, vol. 63(1), pages 132-55, March.
    13. Roberta Romano, 1998. "Empowering Investors: A Market Approach to Securities Regulation," Yale School of Management Working Papers ysm74, Yale School of Management.
    14. Simon, Carol J, 1989. "The Effect of the 1933 Securities Act on Investor Information and the Performance of New Issues," American Economic Review, American Economic Association, vol. 79(3), pages 295-318, June.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ucp:jlstud:v:36:y:2007:p:213-251. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)

    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.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.