Economic Consequences of Regulated Changes in Disclosure: The Case of Executive Compensation

Posted: 29 Dec 2003

See all articles by Kin Lo

Kin Lo

University of British Columbia (UBC) - Sauder School of Business

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Abstract

The 1992 revision of executive compensation disclosure rules in the U.S. could have benefited shareholders by inducing corporate governance improvements or harmed them by increasing disclosure costs. Consistent with the governance improvement hypothesis, companies that lobbied against the regulation had, relative to control firms: (i) return-on-assets and return-on-equity that improved by 0.5% and 3%, respectively; and (ii) excess stock returns of 6% over the 8-month period between the announcement and the adoption of the proposed regulation. Also, firms lobbying more vigorously against the proposal had more positive abnormal stock returns during events that increased the probability of regulation.

Keywords: Corporate governance; Disclosure; Executive compensation; Securities regulation

JEL Classification: D61, G38, G34, K22, M41, M45

Suggested Citation

Lo, Kin, Economic Consequences of Regulated Changes in Disclosure: The Case of Executive Compensation. Journal of Accounting & Economics, Vol. 35, No. 3, pp. 285-314, August 2003. Available at SSRN: https://ssrn.com/abstract=474441

Kin Lo (Contact Author)

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