Firm Value Effects of Targeted Disclosure Regulation: The Role of Reputational Costs

58 Pages Posted: 18 Jul 2018 Last revised: 6 Jan 2022

See all articles by Ionela Andreicovici

Ionela Andreicovici

Frankfurt School of Finance & Management

Katharina Hombach

Carl von Ossietzky University of Oldenburg

Thorsten Sellhorn

Ludwig-Maximilians-Universitaet (LMU) Munich; LMU Munich

Date Written: June 28, 2018

Abstract

We study the reputational costs of ‘targeted disclosure regulation’ – disclosure mandates that pursue policy objectives outside of securities regulators’ traditional missions. This emerging type of disclosure regulation empowers civil society to influence firms’ actions through public pres-sure. We study the SEC’s extraction payments disclosure rule, which requires oil and gas firms to publish details about their payments to host governments. Consistent with reputational costs for affected firms, our event-study results document that the rule affects firm value more negatively where greater reputational risk makes firms more vulnerable to public pressure – particularly about foreign corruption. Our qualitative field evidence suggests that reputational costs arise be-cause the required disclosures facilitate pressure groups’ campaigning. We further uncover the reach of media outlets as an important mechanism magnifying firms’ reputational costs.

Keywords: Disclosure Regulation, Reputational Cost, Pressure Groups, Oil and Gas, Public Scrutiny

JEL Classification: K22, M41

Suggested Citation

Andreicovici, Ionela and Hombach, Katharina and Sellhorn, Thorsten, Firm Value Effects of Targeted Disclosure Regulation: The Role of Reputational Costs (June 28, 2018). TRR 266 Accounting for Transparency Working Paper Series No. 18, Available at SSRN: https://ssrn.com/abstract=3204505 or http://dx.doi.org/10.2139/ssrn.3204505

Ionela Andreicovici

Frankfurt School of Finance & Management ( email )

Adickesallee, 32-34
32-34
Frankfurt am Main, 60322
Germany

Katharina Hombach (Contact Author)

Carl von Ossietzky University of Oldenburg ( email )

Ammerländer Heerstraße 114-118
Oldenburg, 26129
Germany

Thorsten Sellhorn

Ludwig-Maximilians-Universitaet (LMU) Munich ( email )

Ludwigstr. 28 RG IV
Munich, Bavaria 80539
Germany
+49(0)89-21806264 (Phone)
+49(0)89-21806327 (Fax)

HOME PAGE: http://www.rwp.bwl.uni-muenchen.de/personen/professoren/sellhorn/index.html

LMU Munich ( email )

Warburger Straße 100
Paderborn, 33098
Germany
+491705639777 (Phone)

HOME PAGE: http://https://www.en.rwp.bwl.uni-muenchen.de/personen_/professoren/sellhorn/index.html

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