Abstract

http://ssrn.com/abstract=248411
 
 

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The Economic Consequences of Increased Disclosure


Christian Leuz


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Center for Financial Studies (CFS); University of Pennsylvania - Wharton Financial Institutions Center; CESifo Research Network

Robert E. Verrecchia


University of Pennsylvania - Accounting Department

2000

Journal of Accounting Research 38 (Supplement 2000), pp. 91–124

Abstract:     
Economic theory suggests that a commitment by a firm to increased levels of disclosure should lower the information asymmetry component of the firm's cost of capital. But while the theory is compelling, so far empirical results relating increased levels of disclosure to measurable economic benefits have been mixed. One explanation for the mixed results among studies using data from firms publicly registered in the US is that, under current US reporting standards, the disclosure environment is already rich. In this paper, we study German firms that have switched from the German to an international reporting regime (IAS or US-GAAP), thereby committing themselves to increased levels of disclosure. We show that proxies for the information asymmetry component of the cost of capital for the switching firms, namely the bid-ask spread and trading volume, behave in the predicted direction compared to firms employing the German reporting regime.

Keywords: disclosure, international accounting, cost of capital, information asymmetry, liquidity

JEL Classification: D82, M41, G30

Accepted Paper Series


Not Available For Download

Date posted: December 13, 2000 ; Last revised: February 23, 2013

Suggested Citation

Leuz, Christian and Verrecchia, Robert E., The Economic Consequences of Increased Disclosure (2000). Journal of Accounting Research 38 (Supplement 2000), pp. 91–124. Available at SSRN: http://ssrn.com/abstract=248411

Contact Information

Christian Leuz (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-1996 (Phone)
HOME PAGE: http://chicagobooth.edu/fac/christian.leuz
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://www.nber.org
European Corporate Governance Institute (ECGI)
Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Center for Financial Studies (CFS) ( email )
Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
University of Pennsylvania - Wharton Financial Institutions Center
3641 Locust Walk
Philadelphia, PA 19104-6218
United States
CESifo Research Network
Poschinger Str. 5
Munich, DE-81679
Germany
Robert E. Verrecchia
University of Pennsylvania - Accounting Department ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-6976 (Phone)
215-573-2054 (Fax)

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