Regulatory Certification, Risk Factor Disclosure, and Investor Behavior

54 Pages Posted: 15 Jan 2019

See all articles by Ruben Cox

Ruben Cox

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Peter de Goeij

Tilburg University

Date Written: January 6, 2019

Abstract

Does regulatory approval of prospectuses act as a “certification” of securities offerings? Prospectus approval is uninformative about the quality or motives for the underlying offering and should be largely ignored by rational investors, but our survey experiment shows salient references to regulatory oversight in investment advertisements lead to significant increases in willingness to invest and decreases in perceived risks. Conversely, salient disclosure of risk factor information increases risk perceptions and reduces the intention to search for additional information. Various robustness tests confirm that regulatory oversight of securities offerings can be perceived as an endorsement. Our results provide insight regarding the design of the disclosure and the effective regulation of financial markets.

Keywords: salience, investment behavior, advertising, statutory disclosure

JEL Classification: G11, G18, D91, M37

Suggested Citation

Cox, Ruben and de Goeij, Peter, Regulatory Certification, Risk Factor Disclosure, and Investor Behavior (January 6, 2019). Available at SSRN: https://ssrn.com/abstract=3311089

Ruben Cox (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 (0) 10 4088929 (Phone)

Peter De Goeij

Tilburg University ( email )

P.O. Box 90153
Room I607
Tilburg, Noord-Brabant 5000 LE
Netherlands
+31134662083 (Phone)

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