Does Securities Regulation Matter? Mandatory Disclosure, Excess Stock Volatility, and the US Securities Exchange Act of 1934

Albert Bo Zhao, Sheng Li and Chenggang Xu

Journal of Law and Economics, 2026, vol. 69, issue 2, 413 - 463

Abstract: We examine whether the US Securities Exchange Act of 1934 significantly stabilized the market by introducing mandatory disclosure of information. We argue that mandatory information disclosure can curb stock manipulation by enhancing transparency, thereby reducing excess stock volatility. After a comprehensive assessment of the voluntary disclosure practices of companies listed on the New York Stock Exchange before 1934, we find that those with poor disclosure practices experienced a significantly greater reduction in volatility after the implementation of the act compared with those with good disclosure practices. Further analysis reveals that the liquidity of these companies with poor disclosure practices also improved significantly more than that of companies with better disclosure, and the improvement in liquidity was linked to the decrease in their volatility. Given that one key purpose of the act’s legislators was to reduce excess market volatility, our findings provide empirical support for considering this legislative aim successful.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1086/737768 (application/pdf)
http://dx.doi.org/10.1086/737768 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlawec:doi:10.1086/737768

Access Statistics for this article

More articles in Journal of Law and Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().