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Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments

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Abstract

Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments American Law & Economics Association Annual Meetings Year  Paper  Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments Paul Oyer Stanford University, Graduate School of Business This working paper site is hosted by The Berkeley Electronic Press (bepress) and may not be commercially reproduced without the publisher’s permission. http://law.bepress.com/alea/14th/art20 Copyright c©2004 by the author. Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments∗ Michael Greenstone† Paul Oyer‡ Annette Vissing-Jørgensen§ March 2004 Abstract We analyze the last major imposition of mandatory disclosure in US equity markets. The 1964 Securities Act Amendments required a group of firms traded over the counter (OTC) to periodically provide audited financial information, proxy information prior to shareholder meetings, and details on insider holdings and trades to their shareholders for the first time. This legislation left unchanged the disclosure requirements of all NYSE, all AMEX, and some OTC firms. When we use these unaffected groups as a counterfactual for the affected firms, we find that those firms that were newly required to make all types of disclosures required by the 1964 Act had a cumulative abnormal excess return of approximately 20% in the approximately year and a half between the initial calls for legislative action and the law’s passage. In that same time period, firms for which proxy and insider information were the only new mandated forms of disclosure had a (marginally statistically significant) cumulative abnormal excess return of about 10%. In contrast, there is little evidence of a difference between the adjusted returns of affected and unaffected groups in a period when there is no new information about the law or which firms will comply with its requirements. Finally, event study analyses indicate that firm

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