Date of this Version
Journal of Accounting and Economics
This paper examines the economic consequences of a regulatory change mandating OTCBB firms to comply with reporting requirements under the 1934 Securities Exchange Act. This change substantially increases mandated disclosures for firms previously not filing with the SEC. We document that the imposition of disclosure requirements results in significant costs for smaller firms, forcing them off the OTCBB. SEC regulation also has significant benefits. Firms previously filing with the SEC experience positive stock returns and permanent increases in liquidity, suggesting positive externalities from disclosure regulation. Newly Compliant firms exhibit significant increases in liquidity consistent with improved disclosure reducing information asymmetry.
© 2005. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
mandatory disclosure, enforcement externalities, over-the-counter market, liquidity, listing choices, eligibility rule
Bushee, B. J., & Leuz, C. (2005). Economic Consequences of SEC Disclosure Regulation: Evidence From the OTC Bulletin Board. Journal of Accounting and Economics, 39 (2), 233-264. http://dx.doi.org/10.1016/j.jacceco.2004.04.002
Date Posted: 27 November 2017
This document has been peer reviewed.