Mandatory vs. Contractual Disclosure in Securities Markets: Evidence from the 1930s

This paper studies mandatory disclosure documents filed during the period 1933-35 in response to the Securities Act of 1933 and the Securities Exchange Act of 1934. Our sample companies are all listed on the New York Stock Exchange (NYSE) and therefore subject to the NYSE’s disclosure requirements at the time of the regulatory filings. We ask whether the additional disclosures contained in the filed documents constitute information. Using newly-available daily price, volume, and bid and ask quotation data, we test whether the filings are associated with changes in bid-ask spreads, return autocovariance, turnover, volatility, or no-trade days. We find almost no evidence that the new disclosures required by the securities laws—principally having to do with management compensation and large shareholdings—reduced informational asymmetry. We also find no evidence that earnings reports were more informative after enactment of the securities laws.