The Economic Consequences of Disclosure Regulation: Evidence from Online Disclosure of Corporate Governance Practices in U.S. and Canadian markets
29 Pages Posted: 14 Jan 2009 Last revised: 28 May 2013
Date Written: January 12, 2009
Following numerous accounting and financial scandals, there has been a trend on the part of regulatory bodies to encourage wider disclosure of corporate governance practices (CGP). In USA, the Sarbanes-Oxley Act of 2002 (SOX) requires public disclosure, via corporate investor relations websites, of specific information relating to governance practices. The Securities and Exchange Commission (SEC) approved corporate governance rules require companies with listed securities on the New York Stock Exchange to disclose corporate governance practices on their websites (NYSE, 2003). In contrast, the use of the Internet to disclose CGP is still voluntary in Canada. The Toronto Stock Exchange (TSX) requires listed companies to disclose a 'Statement of Corporate Governance Practices' (SCGP) only in the annual report or in the proxy circular. I provide evidence that online disclosure of corporate governance practices differs between the United States (U.S.) and Canada, two otherwise similar business environments with different legal regimes. I find that the extent of corporate governance practices disclosures is higher in Canada relative to the U.S. Further, although U.S. firms are less forthcoming with regards to online disclosure of corporate governance practices, I find that the association between the extent of disclosure of governance practices on corporate websites, forecast accuracy, and the dispersion of analysts’ forecasts is more significant in the US market. This study contributes to the debate on the economic consequences of disclosure regulation.
Keywords: Corporate Websites, Content analysis, Information content, voluntary disclosure
JEL Classification: D82, G14
Suggested Citation: Suggested Citation