The effect of intermediary coverage on disclosure: Evidence from a randomized field experiment |
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| Institution: | 1. A.B. Freeman School of Business, Tulane University, USA;2. Lally School of Management, Rensselaer Polytechnic Institute, USA;1. Kenan-Flagler Business School, University of North Carolina at Chapel Hill, Campus Box 3490, McColl Building, Chapel Hill, NC 27599, USA;2. Ross School of Business, University of Michigan, 701 Tappan Avenue, Ann Arbor, MI 48109, USA;1. University of Notre Dame, USA;2. University of Oregon, USA;3. University of Texas at Austin (Emeritus), USA;4. University of Utah, USA;1. Simon Business School, University of Rochester, USA;2. Haas School of Business, University of California at Berkeley, USA;1. University of Kansas, 1654 Naismith Drive, Lawrence, KS, 66045, USA;2. San Diego State University, 5500 Campanile Drive, San Diego, CA, 92182-8230, USA;1. University at Buffalo, SUNY, USA;2. University of California, Berkeley, USA;3. University of Virginia, USA |
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| Abstract: | Intermediaries play a significant role in capital markets by reducing disclosure processing costs to market participants. Yet, due to selection and other empirical challenges, the extent and mechanisms through which intermediaries influence firm disclosure are largely unknown. To address these challenges, I conduct a field experiment that randomizes coverage of a mandatory disclosure by two key intermediaries—non-governmental organizations and the media. I show that this coverage causes noncompliant firms to publish the disclosure and firms with low-quality disclosures to improve their existing disclosures. Surprisingly, new disclosures from previously noncompliant firms are on average low quality. Survey evidence and cross-sectional tests suggest the main effect may be driven by firms perceiving pressure from the regulator, whose processing costs may have been reduced. My results yield causal estimates of the effect of intermediary coverage on disclosure and shed light on the nature of the stakeholders that subsequently exert costs on firms. |
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| Keywords: | Disclosure Processing costs Intermediaries Corporate tax Media Non-governmental organizations D83 G18 H20 H25 K42 M41 |
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