Does the rule for voluntary disclosure induce truthful disclosure?

Chen-Wen Chen and Victor Liu

Applied Financial Economics Letters, 2008, vol. 4, issue 5, 375-377

Abstract: This article demonstrates how Rule 10b-5 of the 1934 Securities and Exchange Act fails to induce voluntary disclosure. We show that company owners may deter the disclosure policy for their financing decisions. While there is a link between the way in which firms raise external capital and the information which their firms disclose, we show that the transformed reaction of disclosure is the signal for the company's financing policy.

Date: 2008
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DOI: 10.1080/17446540701720642

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