Market Microstructure Effects of U.S.-Canada Differences Relating to Reserve-Based Accounting Disclosures

Journal of International Accounting Auditing and Taxation (JIAAT), 1998, 7(2): 195-214

Posted: 30 Aug 2014

See all articles by Jeff P. Boone

Jeff P. Boone

University of Texas at San Antonio - Department of Accounting

K. K. Raman

The University of Texas at San Antonio

Robert G. Luther

University of the West of England (UWE) - Bristol Business School

Date Written: August 27, 2014

Abstract

High disclosure standards are perceived to be the cornerstone of the U.S. securities markets. However. the Securities and Exchange Commission (SEC) prohibits the quantification of unproved reserves by U.S. oil and gas firms (based on the argument that it would mislead unsophisticated individual investors) although such disclosure is permitted abroad. More­ over, the SEC does permit Canadian firms listed on U.S. exchanges to disclose unproved reserves information since the disclosure is permitted by Canadian regulations. In this paper, the relevance of unproved reserves information is investigated in an international context using a market microstructure methodology based on theoretical models which indicate that the response of the midpoint of the bid-ask spread to unexpected trading activity is a conse­quence of asymmetric information. The results suggest that for U.S. firms disclosure of the magnitude of unproved reserves could potentially improve market quality and favorably impact the market microstructure.

Keywords: Market Microstructure; Unproved Reserves; Information asymmetry; U.S.-Canada Differ­ences

JEL Classification: G18, L11, L15, L51, L80, M40, M41, M42, M48

Suggested Citation

Boone, Jeff P. and Raman, K. K. and Luther, Robert G., Market Microstructure Effects of U.S.-Canada Differences Relating to Reserve-Based Accounting Disclosures (August 27, 2014). Journal of International Accounting Auditing and Taxation (JIAAT), 1998, 7(2): 195-214. Available at SSRN: https://ssrn.com/abstract=2487990

Jeff P. Boone

University of Texas at San Antonio - Department of Accounting ( email )

One UTSA Circle
San Antonio, TX 78249
United States

K. K. Raman (Contact Author)

The University of Texas at San Antonio ( email )

One UTSA Circle
San Antonio, TX 78249
United States
210-458-8749 (Phone)

Robert G. Luther

University of the West of England (UWE) - Bristol Business School ( email )

Frenchay Campus
Bristol, BS16 1QY
United Kingdom
+441 17 344-3419 (Phone)
+441 17 344-2289 (Fax)

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