The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research

Posted: 1 Sep 2016 Last revised: 9 May 2018

See all articles by Christian Leuz

Christian Leuz

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Center for Financial Studies (CFS); University of Pennsylvania - Wharton Financial Institutions Center; CESifo Research Network

Peter D. Wysocki

Boston University Questrom School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2016

Abstract

This paper discusses the empirical literature on the economic consequences of disclosure and financial reporting regulation, drawing on U.S. and international evidence. Given the policy relevance of research on regulation, we highlight the challenges with (1) quantifying regulatory costs and benefits, (2) measuring disclosure and reporting outcomes, and (3) drawing causal inferences from regulatory studies. Next, we discuss empirical studies that link disclosure and reporting activities to firm-specific and market-wide economic outcomes. Understanding these links is important when evaluating regulation. We then synthesize the empirical evidence on the economic effects of disclosure regulation and reporting standards, including the evidence on International Financial Reporting Standards (IFRS) adoption. Several important conclusions emerge. We generally lack evidence on market-wide effects and externalities from regulation, yet such evidence is central to the economic justification of regulation. Moreover, evidence on causal effects of disclosure and reporting regulation is still relatively rare. We also lack evidence on the real effects of such regulation. These limitations provide many research opportunities. We conclude with several specific suggestions for future research.

Keywords: Transparency; Regulation; Accounting standards; Capital markets; Institutional economics; International accounting; Disclosure; IFRS; Political economy; Cost-benefit analysis; Real effects

JEL Classification: D78; D82; G14; G18; G30; G38; K22; K42; M41; M42

Suggested Citation

Leuz, Christian and Wysocki, Peter D., The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research (May 1, 2016). Journal of Accounting Research, Vol. 54, No. 2, 2016. Available at SSRN: https://ssrn.com/abstract=2832817

Christian Leuz (Contact Author)

University of Chicago - Booth School of Business ( email )

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HOME PAGE: http://faculty.chicagobooth.edu/christian.leuz/

National Bureau of Economic Research (NBER) ( email )

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European Corporate Governance Institute (ECGI)

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Center for Financial Studies (CFS) ( email )

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University of Pennsylvania - Wharton Financial Institutions Center

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CESifo Research Network

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Peter D. Wysocki

Boston University Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

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