The Effect of Mandatory Information Disclosure on Financial Constraints

55 Pages Posted: 11 Jan 2021

See all articles by Felipe Cabezon

Felipe Cabezon

University of Southern California - Marshall School of Business

Date Written: July 23, 2020

Abstract

This paper studies the effects of the mandatory implementation of a more informative disclosure regime on firms’ financial constraints and investment policies. I run a difference-in-difference analysis and find that firms moving from a voluntary use of the regime to a mandatory use increase debt issuance and investment in tangible assets, and reduce the level of discussion about difficulties in obtaining debt financing. At the same time, they report higher difficulties obtaining external finance through equity. These findings support the hypothesis that mandatory disclosure provides a commitment device to future disclosure but shuts down the signaling value of voluntary disclosure.

Keywords: Information Disclosure, Firm Financing, Corporate Regulation, Transparency

JEL Classification: G320, G380

Suggested Citation

Cabezon, Felipe, The Effect of Mandatory Information Disclosure on Financial Constraints (July 23, 2020). Available at SSRN: https://ssrn.com/abstract=3725099

Felipe Cabezon (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
66
Abstract Views
263
rank
392,689
PlumX Metrics