Accounting Papers

Document Type

Journal Article

Date of this Version

6-2005

Publication Source

Journal of Accounting and Economics

Volume

39

Issue

2

Start Page

233

Last Page

264

DOI

10.1016/j.jacceco.2004.04.002

Abstract

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.

Copyright/Permission Statement

© 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/

Keywords

mandatory disclosure, enforcement externalities, over-the-counter market, liquidity, listing choices, eligibility rule

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Date Posted: 27 November 2017

This document has been peer reviewed.