Transparency Regulation and Stock Price Informativeness: Evidence from the European Union's Transparency Directive

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2019-07-01
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Imhof, Michael
Tartaroglu, Semih
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Watanabe, Olena
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Accounting

The Department of Accounting was founded in 1984 in the College of Business Administration (later College of Business).

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The Department of Accounting seeks to provide a mastery of basic accounting concepts and encouraging critical and creative thinking about accounting problems. It is intended both for internal users (management) and external users (investors, creditors, government officials, the general public).

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1984–present

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We examine changes in stock price informativeness following the European Union's Transparency Directive (TPD). The TPD, implemented by country between 2007 and 2009, enhanced corporate transparency through mandating regular firm financial disclosures and facilitating the dissemination of financial reports. Using stock return synchronicity as a proxy for stock price informativeness, we find that price informativeness improved following implementation of the TPD. This improvement was more pronounced in countries with strong regulatory environments than those with weak regulatory environments. We additionally examine a later amendment to the TPD that eliminated the requirement of quarterly financial disclosures and document an increase in stock return synchronicity following the amendment. Our findings support prior research suggesting that transparency regulations improve financial information.

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This accepted article is published as Olena V. Watanabe, Michael J Imhof, and Semih Tartaroglu (2019) Transparency Regulation and Stock Price Informativeness: Evidence from the European Union's Transparency Directive. Journal of International Accounting Research: Summer, Vol. 18, No. 2, pp. 89-113. Doi: 10.2308/jiar-52383. Posted with permission

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Tue Jan 01 00:00:00 UTC 2019
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