The Economic Consequences of Disclosure Regulation: Evidence from Online Disclosure of Corporate Governance Practices in U.S. and Canadian Markets

20 Pages Posted: 10 Jan 2010 Last revised: 27 Jul 2014

See all articles by Réal Labelle

Réal Labelle

HEC Montréal - Stephen A. Jarislowsky Chair in Governance

Samir Trabelsi

Brock University - Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: January 10, 2010

Abstract

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 comply or explain with the corporate governance practices' (SCGP) guidelines only in the annual report or in the proxy circular. In this unique setting, 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 the U.S relative Canada suggesting that regulation force firms to maintain a higher level of transparency. Further, I find that the association between the extent of disclosure of governance practices on corporate website and stock liquidity is more significant in the US market. These findings are consistent with the externalities justifications of disclosure regulation. This study contributes to the debate on the economic consequences of disclosure regulation.

Keywords: Corporate Websites, Content analysis, Liquidity, voluntary disclosure, Mandatory Disclosure

JEL Classification: D82, G14

Suggested Citation

Labelle, Réal and Trabelsi, Samir, The Economic Consequences of Disclosure Regulation: Evidence from Online Disclosure of Corporate Governance Practices in U.S. and Canadian Markets (January 10, 2010). CAAA Annual Conference 2010. Available at SSRN: https://ssrn.com/abstract=1534251 or http://dx.doi.org/10.2139/ssrn.1534251

Réal Labelle

HEC Montréal - Stephen A. Jarislowsky Chair in Governance ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514 340 6374 (Phone)

Samir Trabelsi (Contact Author)

Brock University - Accounting ( email )

St. Catharines, Ontario L2S 3A1
Canada

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