The Effect of Intermediary Coverage on Disclosure: Evidence from a Randomized Field Experiment

66 Pages Posted: 27 Jul 2022

See all articles by Andrew Belnap

Andrew Belnap

University of Texas at Austin - McCombs School of Business

Date Written: July 15, 2022

Abstract

Intermediaries play a significant role in capital markets by reducing disclosure processing costs to market participants. Yet, due to selection and other empirical challenges, the extent and mechanisms through which intermediaries influence firm disclosure are largely unknown. To address these challenges, I conduct a field experiment that randomizes coverage of a mandatory disclosure by two key intermediaries—non-governmental organizations and the media. I show that this coverage causes noncompliant firms to publish the disclosure and firms with low-quality disclosures to improve their existing disclosures. Surprisingly, new disclosures from previously noncompliant firms are on average low quality. Survey evidence and cross-sectional tests suggest the main effect may be driven by firms perceiving pressure from the regulator, whose processing costs may have been reduced. My results yield causal estimates of the effect of intermediary coverage on disclosure and shed light on the nature of the stakeholders that subsequently exert costs on firms.

Keywords: Disclosure, processing costs, intermediaries, corporate tax, media, non-governmental organizations

JEL Classification: D83, G18, H20, H25, K42, M41

Suggested Citation

Belnap, Andrew, The Effect of Intermediary Coverage on Disclosure: Evidence from a Randomized Field Experiment (July 15, 2022). Journal of Accounting & Economics (JAE), Vol. 75, No. 1, 2023, Available at SSRN: https://ssrn.com/abstract=4164217

Andrew Belnap (Contact Author)

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

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