Mandated Disclosure and Stock Returns: Evidence from the Over-the-Counter Market

54 Pages Posted: 9 Feb 2004

See all articles by Allen Ferrell

Allen Ferrell

Harvard Law School; European Corporate Governance Institute (ECGI)

Date Written: December 2003


Mandated disclosure requirements placed on publicly-traded firms constitute the core of U.S. securities regulation. Despite their importance, few empirical studies have been done on the impact of mandated disclosure requirements on the capital markets. Using a unique database created for this study, this paper examines the impact the 1964 imposition of mandated disclosure requirements had on the over-the-counter market in terms of stock returns, volatility and stock price synchronicity. Despite this being the only fundamental change in the scope of mandated disclosure in the U.S. in the twentieth century - with the exception of the initial securities acts of the 1930s - this regulatory change has never been examined. This study finds that there was a dramatic reduction in the volatility of OTC stock returns associated with the imposition of mandated disclosure. At the same time, there was no change stock price synchronicity associated with mandated disclosure. The evidence on stock returns is consistent with a positive abnormal return associated with the imposition of mandatory disclosure.

JEL Classification: G18, G38, K22

Suggested Citation

Ferrell, Allen, Mandated Disclosure and Stock Returns: Evidence from the Over-the-Counter Market (December 2003). Harvard Law and Economics Discussion Paper No. 453, Available at SSRN: or

Allen Ferrell (Contact Author)

Harvard Law School ( email )

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(617) 495-1110 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
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1000 Brussels


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