The Impact of Banking Regulation on Voluntary Disclosures: Evidence from the Dodd-Frank Act

52 Pages Posted: 12 Feb 2019

See all articles by Anya Kleymenova

Anya Kleymenova

Board of Governors of the Federal Reserve System

Li Zhang

Rutgers, The State University of New Jersey - Accounting

Date Written: February 11, 2019

Abstract

We investigate how the Dodd-Frank Act (DFA) affects voluntary disclosures of large bank holding companies (BHCs) relative to other banks and unregulated firms in the financial sector. Using a difference-in-differences research design, we find that following the introduction of the DFA, large banks become less likely to issue earnings forecasts containing bad news. They also reduce the frequency of issuing earnings forecasts but increase the frequency of providing forecasts for dividends and return on assets. In earnings-related conference calls, managers of large banks offer information with incrementally higher numerical and forward-looking intensity in both the prepared remarks and their answers to analysts’ questions. Finally, we find that large banks provide incrementally less information than other banks about certain regulated activities and instead focus more on commercial banking financial performance and market innovation. Our findings provide the first evidence of the unintended consequences of the DFA on changes in affected banks’ voluntary disclosures, an important component of the information environment.

Keywords: voluntary disclosure, financial institutions, information environment, regulation, Dodd-Frank Act

JEL Classification: G21, G28, G38

Suggested Citation

Kleymenova, Anya V. and Zhang, Li, The Impact of Banking Regulation on Voluntary Disclosures: Evidence from the Dodd-Frank Act (February 11, 2019). Chicago Booth Research Paper No. 19-08, Fama-Miller Working Paper, Available at SSRN: https://ssrn.com/abstract=3332488 or http://dx.doi.org/10.2139/ssrn.3332488

Anya V. Kleymenova (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2662 (Phone)

Li Zhang

Rutgers, The State University of New Jersey - Accounting ( email )

1 Washington Park, Room 996
Newark, NJ 07102
United States

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