The Information Content of Corporate Earnings: Evidence from the Securities Exchange Act of 1934

55 Pages Posted: 25 Jun 2020

See all articles by Oliver Binz

Oliver Binz

INSEAD

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Date Written: June 1, 2020

Abstract

We examine whether the Securities Exchange Act of 1934 increased the information provided in accounting disclosures. Prior research examining the effects of the Act generally relies on long- window tests and yields mixed results. We improve upon prior designs by examining return, return volatility, and trading volume reactions to earnings news during short earnings announcement windows, which mitigates concerns that our results are driven by confounding events. Further, we employ a difference-in-differences design to control for potential contemporaneous structural changes. We document that the informativeness of earnings announcements of treatment firms (that withheld disclosure before the Act) increases relative to control firms (that disclosed voluntarily before the Act). The results are pronounced for large firms (higher regulatory scrutiny) and firms that do not pay dividends (possibly facing higher agency costs), and are symmetric for positive and negative earnings news.

Keywords: Mandatory disclosure, Earnings announcements, Information content

JEL Classification: G14, G18, M40, M41, M48

Suggested Citation

Binz, Oliver and Graham, John Robert, The Information Content of Corporate Earnings: Evidence from the Securities Exchange Act of 1934 (June 1, 2020). Available at SSRN: https://ssrn.com/abstract=3615644 or http://dx.doi.org/10.2139/ssrn.3615644

Oliver Binz (Contact Author)

INSEAD ( email )

Boulevard de Constance
CEDEP No. 11
F-7705 Fontainebleau Cedex, 77305
France

John Robert Graham

Duke University ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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