The Impact of Statutory Sanctions on the Level and Information Content of Voluntary Corporate Disclosure
Posted: 18 Jul 1998
Date Written: April 1998
We examine the effect of statutory civil and criminal sanctions on voluntary corporate disclosures by firms listed on the Australian Stock Exchange (ASX). Apart from direct investigation of the quantity of voluntary disclosure, we also investigate several possible consequences of altered corporate disclosure policies, namely properties of analysts? forecasts, the degree to which share prices anticipate the information content of periodic earnings reports and the relationship between volatility and corporate disclosures. Our results suggest that, post-sanctions, any increase in voluntary disclosure is confined to smaller firms and those which performed relatively poorly. Moreover, we do not find that analysts? earnings forecasts became more accurate or less diverse following the introduction of statutory sanctions, nor do we find any statistically significant increase in the weight placed on each disclosure?s ability to explain return volatility. We do find evidence that share prices have anticipated earlier the value relevant components of annual periodic accounting data, although this result is again confined to smaller firms. Although our tests are not independent and we have a limited time period post-sanctions, we view our results as casting doubt on the extent to which the imposition of substantive civil or criminal sanctions affects corporate disclosure policy.
JEL Classification: G14, M41, G38, K22
Suggested Citation: Suggested Citation