Transparency Regulation and Stock Price Informativeness: Evidence From the European Union’s Transparency Directive

Journal of International Accounting Research (Forthcoming)

57 Pages Posted: 3 Feb 2019 Last revised: 11 Apr 2019

See all articles by Olena Watanabe

Olena Watanabe

Iowa State University - Debbie and Jerry Ivy College of Business

Michael Imhof

Wichita State University - Barton School of Accountancy

Semih Tartaroglu

Wichita State University

Date Written: January 27, 2019

Abstract

We examine changes in stock price informativeness following the European Union’s Transparency Directive (TPD). The TPD, implemented by country between 2007 and 2009, enhanced corporate transparency through mandating regular firm financial disclosures and the dissemination of financial reports. Using stock return synchronicity as a proxy for stock price informativeness, we find that price informativeness improved following implementation of the TPD. This improvement was more pronounced in countries with strong regulatory environments than those with weak regulatory environments. We also examine a later amendment to the TPD that eliminated the requirement of quarterly financial disclosures and document an increase in stock return synchronicity following the amendment, suggesting that it may have been premature from the standpoint of public information flow. Our findings support prior research suggesting that transparency regulations improve financial information.

https://doi.org/10.2308/jiar-52383

Keywords: stock return synchronicity, stock price informativeness, transparency regulations

JEL Classification: F30, G15, G30, M4

Suggested Citation

Watanabe, Olena and Imhof, Michael and Tartaroglu, Semih, Transparency Regulation and Stock Price Informativeness: Evidence From the European Union’s Transparency Directive (January 27, 2019). Journal of International Accounting Research (Forthcoming). Available at SSRN: https://ssrn.com/abstract=3320095 or http://dx.doi.org/10.2139/ssrn.3320095

Olena Watanabe

Iowa State University - Debbie and Jerry Ivy College of Business ( email )

613 Wallace Road
Ames, IA 50011-2063
United States

Michael Imhof (Contact Author)

Wichita State University - Barton School of Accountancy ( email )

United States

Semih Tartaroglu

Wichita State University ( email )

Department of Finance, Real Estate & Decision
Sciences (FREDS)
Wichita, KS 67260-0077
United States
(316) 978 7124 (Phone)

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