Download this Paper Open PDF in Browser

Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments

59 Pages Posted: 26 Aug 2005  

Annette Vissing-Jorgensen

National Bureau of Economic Research (NBER); University of California Berkeley, Haas School of Business

Michael Greenstone

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Paul Oyer

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Abstract

The 1964 Securities Acts Amendments extended the mandatory disclosure requirements that had applied to listed firms since 1934 to large firms traded Over-the-Counter (OTC). We find several pieces of evidence indicating that investors valued these disclosure requirements, two of which are particularly striking. First, a firm-level event study reveals that the OTC firms most affected by the 1964 Amendments had abnormal excess returns of about 3.5 percent in the weeks immediately surrounding the announcement that they had begun to comply with the new requirements. Second, we estimate that the most affected OTC firms had abnormal excess returns ranging between 11.5 and 22.1 percent in the period between when the legislation was initially proposed and when it went into force. These returns are adjusted for the standard four factors and are relative to NYSE/AMEX firms, matched on size and book-to-market equity, that were unaffected by the legislation. While we cannot determine how much of shareholders' gains were a transfer from insiders of these same companies, our results suggest that mandatory disclosure causes managers to focus more narrowly on maximizing shareholder value.

Keywords: disclosure, SEC, securities market regulation

JEL Classification: G12, G28, G38, K22, L51, M41, M45, N22

Suggested Citation

Vissing-Jorgensen, Annette and Greenstone, Michael and Oyer, Paul, Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments. Quarterly Journal of Economics, Forthcoming; Stanford Law and Economics Olin Working Paper No. 296; MIT Department of Economics Working Paper No. 04-33; AFA 2005 Philadelphia Meetings. Available at SSRN: https://ssrn.com/abstract=789865 or http://dx.doi.org/10.2139/ssrn.597142

Annette Vissing-Jorgensen

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of California Berkeley, Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Michael Greenstone

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paul Oyer (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-736-1047 (Phone)
650-725-0468 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paper statistics

Downloads
507
Rank
17,062
Abstract Views
3,585