Transparency regulation and stock price informativeness: evidence from the european union’s transparency directive
Date
2019Author
Watanabe, Olena V.
Imhof, Michael J.
Tartaroglu, Semih
Metadata
Show full item recordCitation
Olena V. Watanabe, Michael J Imhof, and Semih Tartaroglu (2019) Transparency Regulation and Stock Price Informativeness: Evidence from the European Union's Transparency Directive. Journal of International Accounting Research: Summer, Vol. 18, No. 2, pp. 89-113
Abstract
We examine changes in stock price informativeness following the European Union’s Transparency Directive (TPD). The TPD, implemented by country between 2007 and 2009, enhanced corporate transparency through mandating regular firm financial disclosures and facilitating the dissemination of financial reports. Using stock return synchronicity as a proxy for stock price informativeness, we find that price informativeness improved following implementation of the TPD. This improvement was more pronounced in countries with strong regulatory environments than those with weak regulatory environments. We additionally examine a later amendment to the TPD that eliminated the requirement of quarterly financial disclosures and document an increase in stock return synchronicity following the amendment. Our findings support prior research suggesting that transparency regulations improve financial information.
Description
Click on the DOI link to access the article (may not be free).