“Do the SEC’s disclosure rules add shareholder value? ” by Mr. Patrick W. Ryu
Mr. Patrick W. Ryu
Ph.D. Candidate in Accounting
J. M. Tull School of Accounting
Terry College of Business, University of Georgia
The Securities and Exchange Commission (SEC) states that, to fulfill its mission of protecting investors and establishing confidence in capital markets, it is imperative that firms maintain a steady flow of timely, comprehensive, and accurate disclosure. As a result, the SEC regulates corporate disclosures. In this study, I examine whether and to what extent the SEC’s final rules on disclosure affect shareholder value. Through a comprehensive event study approach, I find that SEC rules on average do not collectively add to (or reduce) shareholder value. However, I do find that approximately 61% of SEC final rules generate significant stock price reactions. I find that disclosure rules enacted following periods of macroeconomic uncertainty (e.g., Enron/WorldCom frauds, financial crisis of 2008) tend to result in positive overall abnormal returns, as well as disclosure regulations that target firms with high information asymmetry, high agency costs, and low potential for proprietary costs. Overall, my results suggest that while SEC disclosure regulation appears to have an impact on shareholder value, its overall effect on stock prices appears neutral. Furthermore, any positive effects appear to depend on macroeconomic and firm-specific characteristics.
