Economic Consequences of Regulated Changes in Disclosure: The Case of Executive Compensation

40 Pages Posted: 31 Oct 2000

See all articles by Kin Lo

Kin Lo

University of British Columbia (UBC) - Sauder School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 2002

Abstract

The 1992 revision of executive compensation disclosure rules in the U.S. could have benefited shareholders by inducing corporate governance improvements or harmed them by increasing disclosure costs. Consistent with the governance improvement hypothesis, companies that lobbied against the regulation had, relative to control firms: (i) return-on-assets and return-on-equity that improved by 0.5% and 3%, respectively; and (ii) excess stock returns of 6% over the 8-month period between the announcement and the adoption of the proposed regulation. Also, firms lobbying more vigorously against the proposal had more positive abnormal stock returns during events that increased the probability of regulation.

Keywords: disclosure, executive compensation, corporate governance, securities regulation

JEL Classification: D61, G30, G38, G34, K22, M41

Suggested Citation

Lo, Kin, Economic Consequences of Regulated Changes in Disclosure: The Case of Executive Compensation (July 2002). Sauder School of Business Working Paper. Available at SSRN: https://ssrn.com/abstract=244532 or http://dx.doi.org/10.2139/ssrn.244532

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