Capital Market Development and Confidence in Disclosure Quality

Journal of Financial Reporting, Forthcoming

61 Pages Posted: 1 Apr 2015 Last revised: 22 Apr 2019

See all articles by Henry L. Friedman

Henry L. Friedman

University of California, Los Angeles (UCLA) - Accounting Area

Multiple version iconThere are 2 versions of this paper

Date Written: April 18, 2019


Using a survey-based measure that directly captures beliefs about disclosure quality (SFARS) in a panel with over 1,000 country-year observations, this study examines macro-level capital market consequences of confidence in disclosure quality. Supporting construct validity, SFARS is associated with prior measures of disclosure quality, tends to decline around accounting scandals, and tends to increase around corporate reforms. Evidence from panel regressions controlling for country effects, prior levels of market development, and other plausible determinants suggests that more positive beliefs about disclosure quality are associated with credit market development, but inferences associated with equity market development are sensitive to empirical specification and variable definitions. Additional analyses find little support for the effects of SFARS on capital market development varying with other macroeconomic or institutional features.

Keywords: confidence; disclosure quality; international accounting; equity market development; credit market development

JEL Classification: E22, G15, G18, G38, M41, M42, M48

Suggested Citation

Friedman, Henry L., Capital Market Development and Confidence in Disclosure Quality (April 18, 2019). Journal of Financial Reporting, Forthcoming, Available at SSRN: or

Henry L. Friedman (Contact Author)

University of California, Los Angeles (UCLA) - Accounting Area ( email )

D406 Anderson Complex
Los Angeles, CA 90095-1481
United States

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