Corporate Governance and the Information Environment: Evidence from State Antitakeover Laws
51 Pages Posted: 10 Mar 2010 Last revised: 15 Nov 2011
Date Written: June 17, 2011
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.
Keywords: antitakeover laws, corporate governance, financial reporting quality, information asymmetry
JEL Classification: M41, G10
Suggested Citation: Suggested Citation