Corporate Governance and the Information Environment: Evidence from State Antitakeover Laws

51 Pages Posted: 10 Mar 2010 Last revised: 15 Nov 2011

See all articles by Chris Armstrong

Chris Armstrong

Stanford Graduate School of Business

Karthik Balakrishnan

Rice University - Jesse H. Jones Graduate School of Business

Daniel A. Cohen

Vanderbilt University - Owen Graduate School of Management

Date Written: June 17, 2011

Abstract

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

Armstrong, Chris S. and Balakrishnan, Karthik and Cohen, Daniel A., Corporate Governance and the Information Environment: Evidence from State Antitakeover Laws (June 17, 2011). Journal of Accounting & Economics (JAE), Forthcoming., Available at SSRN: https://ssrn.com/abstract=1567291

Chris S. Armstrong

Stanford Graduate School of Business ( email )

655 Knight Way
E316
Stanford, CA 94305-5015
United States

HOME PAGE: http://https://www.gsb.stanford.edu/faculty-research/faculty/christopher-s-armstrong

Karthik Balakrishnan

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Daniel A. Cohen (Contact Author)

Vanderbilt University - Owen Graduate School of Management ( email )

401 21st Avenue South
Nashville, TN 37203
United States

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