The Impact of Statutory Sanctions on the Level and Information Content of Voluntary Corporate Disclosure

Posted: 18 Jul 1998

See all articles by Philip R. Brown

Philip R. Brown

UWA Business School, M250; Financial Research Network (FIRN)

Stephen L. Taylor

University of Technology Sydney; Financial Research Network (FIRN)

Terry S. Walter

University of Sydney; University of Technology, Sydney - School of Finance and Economics; Financial Research Network (FIRN)

Date Written: April 1998

Abstract

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

Brown, Philip R. and Taylor, Stephen L. and Walter, Terry Stirling, The Impact of Statutory Sanctions on the Level and Information Content of Voluntary Corporate Disclosure (April 1998). Available at SSRN: https://ssrn.com/abstract=92563

Philip R. Brown

UWA Business School, M250 ( email )

Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Stephen L. Taylor (Contact Author)

University of Technology Sydney ( email )

UTS Business School
PO Box 123 Broadway
Sydney, NSW 2007
Australia
61295143437 (Phone)
61295143513 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Terry Stirling Walter

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

University of Technology, Sydney - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia
+61 2 9514 3860 (Phone)
+61 2 9514 7711 (Fax)

HOME PAGE: http://datasearch.uts.edu.au/business/finance/staff/StaffDetails.cfm?UnitStaffId=5373

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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