Mandatory Disclosures and Opportunism: Evidence from Repurchases

71 Pages Posted: 11 May 2021

See all articles by Brian Bratten

Brian Bratten

University of Kentucky - Von Allmen School of Accountancy

Meng Huang

University of Toledo

Nicole Thorne Jenkins

University of Virginia - McIntire School of Commerce

Hong Xie

University of Kentucky - Von Allmen School of Accountancy

Date Written: September 27, 2024

Abstract

We examine the effect of disclosure requirements on managers’ stock repurchase decisions. In 2003, the SEC amended Rule 10b-18, significantly increasing the disclosure requirements for and transparency of stock repurchases for all issuers. While stock repurchases are often used by firms to efficiently return capital to shareholders, they can also be used opportunistically to increase earnings per share (EPS). We find that the 2003 SEC amendment enables investors to detect and discount opportunistic repurchases, curtails the extent to which firms use opportunistic repurchases, and reduces or eliminates the negative real effects stemming from opportunistic repurchases (reduced employment, reduced capital expenditures, and reduced R&D expenditures). Our evidence suggests that disclosures aimed at increasing the transparency of firms’ activities can significantly reduce the extent to which firms use these activities opportunistically to manage earnings, thereby reducing the accompanying real consequences of opportunistic behavior.

Keywords: Transparency; mandatory disclosure; repurchases; earnings management; and fuzzy regression discontinuity design.

Suggested Citation

Bratten, Brian and Huang, Meng and Jenkins, Nicole Thorne and Xie, Hong, Mandatory Disclosures and Opportunism: Evidence from Repurchases (September 27, 2024). Available at SSRN: https://ssrn.com/abstract=3839651 or http://dx.doi.org/10.2139/ssrn.3839651

Brian Bratten

University of Kentucky - Von Allmen School of Accountancy ( email )

Lexington, KY 40506
United States
859-257-1947 (Phone)

HOME PAGE: http://gatton.uky.edu/faculty-research/departments/von-allmen-school-accountancy/directory

Meng Huang

University of Toledo ( email )

United States

Nicole Thorne Jenkins

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States

HOME PAGE: http://https://www.commerce.virginia.edu/faculty/nt4jw

Hong Xie (Contact Author)

University of Kentucky - Von Allmen School of Accountancy ( email )

Lexington, KY 40506
United States
(859) 257-4648 (Phone)
(859) 257-3654 (Fax)

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