Mandatory disclosure and learning from external market participants: Evidence from the JOBS act

Jedson Pinto

Journal of Accounting and Economics, 2023, vol. 75, issue 1

Abstract: This paper examines whether mandatory disclosure affects the extent to which firms learn from external market participants. Conventional wisdom suggests that mandatory disclosure should increase the total amount of information in financial markets. However, disclosure can also reduce investors' incentives to acquire and produce information. Using the JOBS Act to identify variations in disclosure requirements, this paper finds that firms with reduced disclosure requirements attract more informed investors and learn more from financial markets than those with stricter disclosure requirements. This learning is concentrated among firms that attract sophisticated investors, particularly those with industry expertise, and weakens once firms are forced to disclose more information. Overall, the results suggest that one benefit from regulators’ recent efforts to reduce U.S. firm disclosure requirements is an increase in firm learning.

Keywords: Market feedback; Disclosure; JOBS Act; Managerial learning; Feedback effects (search for similar items in EconPapers)
JEL-codes: D61 G14 G30 M41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:75:y:2023:i:1:s0165410122000519

DOI: 10.1016/j.jacceco.2022.101528

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