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Corporate Governance and the Information Environment: Evidence from State Antitakeover LawsChris ArmstrongUniversity of Pennsylvania - Accounting Department Karthik BalakrishnanUniversity of Pennsylvania - Accounting Department; University of Pennsylvania - The Wharton School Daniel A. CohenUniversity of Texas at Dallas - Naveen Jindal School of Management June 17, 2011 Journal of Accounting & Economics (JAE), Forthcoming. Abstract: We examine the relation between corporate governance and firms’ information environments. We use the passage of state antitakeover laws in the U.S. as a source of exogenous variation in an important governance mechanism to identify changes in firms’ information environments. We find that information asymmetry and private information gathering decreased and that financial statement informativeness increased following the passage of the antitakeover laws. Cross-sectional analyses indicate that the increased level of financial statement informativeness is attributable to firms that are most likely to access equity markets rather than managerial entrenchment, managerial career concerns, or managers’ pursuit of the quiet life.
Number of Pages in PDF File: 51 Keywords: antitakeover laws, corporate governance, financial reporting quality, information asymmetry JEL Classification: M41, G10 Accepted Paper SeriesDate posted: March 10, 2010 ; Last revised: November 15, 2011Suggested CitationContact Information
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