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http://ssrn.com/abstract=789865
 
 

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Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments


Annette Vissing-Jorgensen


Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Michael Greenstone


Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Paul Oyer


Stanford Graduate School of Business; National Bureau of Economic Research (NBER)


Quarterly Journal of Economics, Forthcoming
Stanford Law and Economics Olin Working Paper No. 296
MIT Department of Economics Working Paper No. 04-33
AFA 2005 Philadelphia Meetings

Abstract:     
The 1964 Securities Acts Amendments extended the mandatory disclosure requirements that had applied to listed firms since 1934 to large firms traded Over-the-Counter (OTC). We find several pieces of evidence indicating that investors valued these disclosure requirements, two of which are particularly striking. First, a firm-level event study reveals that the OTC firms most affected by the 1964 Amendments had abnormal excess returns of about 3.5 percent in the weeks immediately surrounding the announcement that they had begun to comply with the new requirements. Second, we estimate that the most affected OTC firms had abnormal excess returns ranging between 11.5 and 22.1 percent in the period between when the legislation was initially proposed and when it went into force. These returns are adjusted for the standard four factors and are relative to NYSE/AMEX firms, matched on size and book-to-market equity, that were unaffected by the legislation. While we cannot determine how much of shareholders' gains were a transfer from insiders of these same companies, our results suggest that mandatory disclosure causes managers to focus more narrowly on maximizing shareholder value.

Number of Pages in PDF File: 59

Keywords: disclosure, SEC, securities market regulation

JEL Classification: G12, G28, G38, K22, L51, M41, M45, N22

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Date posted: August 26, 2005  

Suggested Citation

Vissing-Jorgensen, Annette and Greenstone, Michael and Oyer, Paul, Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments. Quarterly Journal of Economics, Forthcoming; Stanford Law and Economics Olin Working Paper No. 296; MIT Department of Economics Working Paper No. 04-33; AFA 2005 Philadelphia Meetings. Available at SSRN: http://ssrn.com/abstract=789865 or http://dx.doi.org/10.2139/ssrn.597142

Contact Information

Annette Vissing-Jorgensen
Northwestern University - Kellogg School of Management ( email )
Department of Finance
2001 Sheridan Road
Evanston, IL 60208-2001
United States
HOME PAGE: http://www.kellogg.northwestern.edu/faculty/vissing/htm/research1.htm
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Michael Greenstone
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
50 Memorial Drive
E52-391
Cambridge, MA 02142
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Paul Oyer (Contact Author)
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
650-736-1047 (Phone)
650-725-0468 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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