{"title":"Investor Protection and Post-Disclosure Disagreement: International Evidence","authors":"Tao Chen","doi":"10.1142/s1094406022500123","DOIUrl":null,"url":null,"abstract":"Synopsis The research problem Adding to the literature on investor protection, this study investigates whether nationwide institutional features may explain cross-country variation in post-disclosure disagreement. Motivation Previous research has revealed that the release of financial statements aggravates investor disagreement rather than attenuating it. However, most studies only obtain empirical evidence in the context of the United States; no work has examined this research question in an international setting. Another motivation for this paper is the attempt to understand the contradiction in the literature, which emphasizes micro-level determinants. By contrast, minimal attention has been paid to the macro-level institutional factors of a country’s information environment, which presumably prompts investors to shape heterogeneous beliefs. The test hypotheses H1: Countries with greater corporate transparency are associated with a lower level of post-disclosure investor disagreement. H2: Countries with stronger legal protection are associated with a lower level of post-disclosure investor disagreement. Target population Various stakeholders include firm managers, financial analysts, regulatory watchdogs, and users of earnings reports. Adopted methodology Ordinary Least Squares (OLS) Regressions Analyses Gao et al. ( 2012 ) to measure investor disagreement while we quantify corporate transparency (legal protection) by extracting the first principal component of nine countrywide characteristics pertinent to disclosure requirements (legal systems). Using a global sample from 38 countries, we perform a cross-sectional regression of post-disclosure disagreement on two proxies for investor protection after accounting for firm-specific control variables. Findings We find clear evidence of post-disclosure disagreement in all countries. Next, we document a negative relationship between corporate transparency (legal protection) and post-disclosure disagreement. Additional tests confirm that both better disclosures and strong regulations enhance information precision, accelerate information dissemination, and reduce informed trading, thus leading to a lower level of post-disclosure disagreement.","PeriodicalId":47122,"journal":{"name":"International Journal of Accounting","volume":null,"pages":null},"PeriodicalIF":2.0000,"publicationDate":"2022-07-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Journal of Accounting","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1142/s1094406022500123","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Synopsis The research problem Adding to the literature on investor protection, this study investigates whether nationwide institutional features may explain cross-country variation in post-disclosure disagreement. Motivation Previous research has revealed that the release of financial statements aggravates investor disagreement rather than attenuating it. However, most studies only obtain empirical evidence in the context of the United States; no work has examined this research question in an international setting. Another motivation for this paper is the attempt to understand the contradiction in the literature, which emphasizes micro-level determinants. By contrast, minimal attention has been paid to the macro-level institutional factors of a country’s information environment, which presumably prompts investors to shape heterogeneous beliefs. The test hypotheses H1: Countries with greater corporate transparency are associated with a lower level of post-disclosure investor disagreement. H2: Countries with stronger legal protection are associated with a lower level of post-disclosure investor disagreement. Target population Various stakeholders include firm managers, financial analysts, regulatory watchdogs, and users of earnings reports. Adopted methodology Ordinary Least Squares (OLS) Regressions Analyses Gao et al. ( 2012 ) to measure investor disagreement while we quantify corporate transparency (legal protection) by extracting the first principal component of nine countrywide characteristics pertinent to disclosure requirements (legal systems). Using a global sample from 38 countries, we perform a cross-sectional regression of post-disclosure disagreement on two proxies for investor protection after accounting for firm-specific control variables. Findings We find clear evidence of post-disclosure disagreement in all countries. Next, we document a negative relationship between corporate transparency (legal protection) and post-disclosure disagreement. Additional tests confirm that both better disclosures and strong regulations enhance information precision, accelerate information dissemination, and reduce informed trading, thus leading to a lower level of post-disclosure disagreement.
期刊介绍:
The aim of The International Journal of Accounting is to advance the academic and professional understanding of accounting theory, policies and practice from the international perspective and viewpoint. The Journal editorial recognizes that international accounting is influenced by a variety of forces, e.g., governmental, political and economic. Thus, the primary criterion for manuscript evaluation is the incremental contribution to international accounting literature and the forces that impact the field. The Journal aims at understanding the present and potential ability of accounting to aid in analyzing and interpreting international economic transactions and the economic consequences of such reporting. These transactions may be within a profit or non-profit environment. The Journal encourages a broad view of the origins and development of accounting with an emphasis on its functions in an increasingly interdependent global economy. The Journal also welcomes manuscripts that help explain current international accounting practices, with related theoretical justifications, and identify criticisms of current policies and practice. Other than occasional commissioned papers or special issues, all the manuscripts published in the Journal are selected by the editors after the normal double-blind refereeing process.