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Article
Publication date: 14 June 2011

Lennine Occhino, Linda Shore and Erika Gosker

The purpose of this paper is to describe interpretive and compliance issues arising under the Labor Department's interim final regulations under the statutory exemption…

Abstract

Purpose

The purpose of this paper is to describe interpretive and compliance issues arising under the Labor Department's interim final regulations under the statutory exemption for the provision of services provided by Section 408(b)(2) of ERISA, which will become effective on January 1, 2012.

Design/methodology/approach

The paper analyzes the published interim final regulations and considers significant comments filed in response to the proposed regulations.

Findings

Effective January 1, 2012, covered service providers who rely on the statutory exemption for the provision of services provided by Section 408(b)(2) must begin complying with the interim final amendments to the regulations under Section 408(b)(2) (the “Regulation”). Among other changes, the Regulation will require service providers to provide additional disclosures of direct and indirect compensation and to identify whether they expect that they will be providing services as a fiduciary or as a registered investment adviser. The primary purpose of the Regulation is to assist plan sponsors in evaluating service provider relationships, including total compensation that will be received by the service provider and conflicts of interests to which the service provider may be subject. The Regulation will apply to both new and existing service provider arrangements on January 1, 2012. Failure to comply with the Regulation may result in the assessment of excise taxes under Section 4975 of the Internal Revenue Code unless other exemptive relief is available. Service provider arrangements may be eligible for exemptive relief under certain other statutory and administrative exemptions.

Originality/value

The paper describes possible compliance issues that may arise under the Regulation and identifies and evaluates interpretive and compliance issues that have been noted since the proposed amendments were published.

Details

Journal of Investment Compliance, vol. 12 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 10 October 2016

Trevor C. Chamberlain, Abdul-Rahman Khokhar and Sudipto Sarkar

The purpose of this paper is to offer an alternative approach to measure the cost-benefit tradeoff, by analyzing stockholders’ reactions to the announcement and vote on…

Abstract

Purpose

The purpose of this paper is to offer an alternative approach to measure the cost-benefit tradeoff, by analyzing stockholders’ reactions to the announcement and vote on the proposed rule. More specifically, the authors use event study methodology to investigate the stock price reaction on two key dates; that is, the announcement date and the voting date of the proposed short-term borrowing disclosure regulation, and argue that positive abnormal stock returns indicate that the expected benefits of the regulation outweigh the compliance costs. A negative reaction would indicate that, in the eyes of investors, the costs of compliance exceed the expected benefits.

Design/methodology/approach

The authors use event study analysis and apply the market model to equal-weighted portfolios of 2,450 financial and 3,985 non-financial US firms to calculate mean cumulative abnormal stock returns (MCARs, hereafter) on the announcement and voting dates. Then, the authors conduct mean difference tests on firm-level MCARs across three event windows, that is, (−30,−1), (0,+1) and (+2,+30), to confirm if the MCARs of financial firms are different from those of non-financial firms on both the announcement and the voting dates. Finally, robustness tests are performed with alternate benchmark, using value-weighted portfolios, for the market.

Findings

The authors find that the market reaction is positive and significant at the announcement date and negative and significant at the voting date of the proposed regulation of short-term borrowing disclosure regulation. Overall, the paper documents a positive market reaction, indicating the usefulness of the disclosure from the vantage point of users. Examining and comparing the results for various subsets, including commercial banks and saving institutions, bank holding companies, size quartiles, and exchange listed and OTC registrants, the authors find that a “one-size-fits-all” approach to regulation is undesirable.

Originality/value

This is first empirical study, to best of the authors’ knowledge, to explore stockholder reaction to a proposed, rather than an enforced, Securities and Exchange Commission (SEC) regulation and may contribute to the SEC’s final decision on the rule. Second, given a dissimilar reaction from investors of different firms, the results suggest that the SEC needs to reconsider its one-size-fit-all approach for the proposed rule. Finally, because the proposed disclosure would affect all SEC registrants, the economic implications of the findings are important not only for stockholders, but also for regulators, as they attempt to manage systematic risk and optimize the level of market intervention.

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Article
Publication date: 1 June 2005

Ya‐Fang Wang, Picheng Lee, Chen‐Lung Chin and Gary Kleinman

This study examines whether a regulation on mandatory disclosure of financial forecasts since June 1991 and further sanction imposition since March 1998 contribute to…

Abstract

This study examines whether a regulation on mandatory disclosure of financial forecasts since June 1991 and further sanction imposition since March 1998 contribute to lower IPO firms’ initial and aftermarket returns, and shorten honeymoon periods. The study is based on 423 IPO firms after the regulation required them to disclose their forecasts and 53 IPO firms prior to the regulation. The findings report that initial and aftermarket returns are lower, and honeymoon periods are shorter in the post‐regulation period than those in the pre‐regulation. The findings also report that initial and aftermarket returns are relatively smaller, and the honeymoon periods are shorter after the March 1998 regulatory sanction was imposed after controlling other variables. These results document that the financial forecasts disclosure regulation evidently contributes to mitigating information asymmetry.

Details

Journal of Financial Regulation and Compliance, vol. 13 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

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Article
Publication date: 14 May 2018

David Mutua Mathuva and H. Gin Chong

This paper aims to utilize institutional theory to examine the impact of the 2008-2010 regulatory reforms on compliance with mandatory disclosures by savings and credit…

Abstract

Purpose

This paper aims to utilize institutional theory to examine the impact of the 2008-2010 regulatory reforms on compliance with mandatory disclosures by savings and credit co-operatives (SACCOs) in Kenya.

Design/methodology/approach

Two-stage least squares panel regression approach is utilized to analyse data covering 1,272 firm-year observations for 212 SACCOs over a six-year period, 2008-2013. An analysis of the pre- and post-regulation impacts on compliance with mandatory disclosure requirements is also performed.

Findings

The results, which are in support of the institutional theory, reveal that licensed SACCOs engage in higher compliance with mandatory disclosures, and this improves from the pre- to the post-regulation period. The results show that SACCOs under inquiry engage in lower compliance with mandatory disclosure requirements, especially in the post-regulation period. The findings also reveal a significant and positive association between SACCO size, co-operative governance and compliance with mandatory disclosure requirements.

Research limitations/implications

The study focuses on transition-level SACCOs in a single country. An extension into other jurisdictions with nascent, transitional and mature SACCOs would provide greater insights into the impact of disclosure regulation. Further, the study uses a self-constructed disclosure checklist which is subject to coding errors and biases.

Practical implications

The findings highlight the need for SACCO regulators and accounting professional body to devise incentives to improve the level of compliance with required disclosures.

Originality/value

The study contributes to the dearth of evidence on the efficacy of the introduction of mandatory disclosure requirements in a developing country where compliance is problematic because of difficulties with enforcement.

Details

Journal of Financial Regulation and Compliance, vol. 26 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

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Article
Publication date: 10 April 2017

Mohammed Abdullah Ammer and Nurwati A. Ahmad-Zaluki

This paper aims to examine the impact of disclosure regulation on the levels of bias and accuracy in management earnings forecasts disclosed in the prospectuses of…

Abstract

Purpose

This paper aims to examine the impact of disclosure regulation on the levels of bias and accuracy in management earnings forecasts disclosed in the prospectuses of Malaysian initial public offering (IPO). Specifically, the authors investigated the two environments of regulation (mandatory versus voluntary) to draw some conclusions regarding the benefits of regulating disclosure of management earnings forecasts.

Design/methodology/approach

A sample of 111 Malaysian IPOs listing on the Main Market of Bursa Malaysia from January 1, 2004 to February 29, 2012 was used. The paper uses both univariate and multivariate statistical analyses on this sample of IPOs.

Findings

The empirical results of these multivariate regressions indicated that disclosure regulation has positive and significant impact on the bias and accuracy of management earnings forecasts disclosed in IPO prospectus. In general, the study results suggest that using disclosure regulation to improve the quality of IPO earnings forecasts can be, to some extent, an effective strategy.

Practical implications

The findings of this study have important implications for regulators and investors. The findings can provide them some relevant insights on the improvements to the earnings forecasts accuracy and trends of the forecast (optimistic or pessimistic) after the change from mandatory to voluntary disclosure. Thus, the authorities may learn whether this change is an effective policy or whether the regime of mandatory disclosure was better for IPO companies and should be reversed.

Originality/value

This study is regarded as the first attempt to investigate the impact of reforms in disclosure regulation on the quality of management earnings forecasts of IPO prospectuses in a developing nation such as Malaysia. In spite of this, the paper focuses on a single country, and it contributes significant insights to the debate about the credibility of IPO management earnings forecasts.

Details

Journal of Financial Reporting and Accounting, vol. 15 no. 1
Type: Research Article
ISSN: 1985-2517

Keywords

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Article
Publication date: 29 June 2020

Maha Khemakhem Jardak and Hamadi Matoussi

The purpose of this study is to examine the effectiveness of financial market rules in protecting minorities.

Abstract

Purpose

The purpose of this study is to examine the effectiveness of financial market rules in protecting minorities.

Design/methodology/approach

The study compares two alternative disclosure rules on insider trading, namely, the market abuse directive (Directive 2004/72/EC), inspired from the United State (US) insider trading regulation enacted by the Sarbanes–Oxley act and the transparency directive enacted by the European (Directive 2004/109/EC) dealing with the crossing of the shareholding threshold. To investigate which one is more effective in signaling reserved information, and thus in reducing information asymmetry, the authors run an event study on the French context, where both regulations are adopted. The data were hand collected from the French stock exchange securities commissions during the two years following the implementation of the two regulations in 2004. The final sample consists of 363 insiders trading and 35 crossing shareholding thresholds for 10 top French firms during the period 2006-2007.

Findings

The results show that the French market reacts significantly to insider trading, but poorly to the crossing shareholding thresholds. Abnormal returns are greater after insider purchases than after crossing up thresholds. These findings support the superiority of the insider disclosure regulation, as it has better information content and provides better protection to minorities.

Research limitations/implications

The study contributes to the corporate governance literature by comparing two disclosure-trading policies. The authors conclude that regulation of disclosure of insider trading along the lines of US disclosure rules is more informative to the market and thus more relevant and important than disclosure of cross-threshold trades.

Practical implications

The study contributes to the corporate governance literature by comparing two disclosure-trading policies. The authors conclude that regulation of disclosure of insider trading along the lines of US disclosure rules is more informative to the market and thus more relevant and important than disclosure of cross-threshold trades. This finding can be helpful for the securities lawmakers and regulators in the process of insider trading law enforcement.

Originality/value

Previous researchers approached the question of insider trading focusing on the identity of insiders. In the research, the authors address the question from another perspective, namely, the crossing of thresholds. Another methodological contribution of the study is the use of a market model that incorporates GARCH (generalized autoregressive conditional heteroskedastic) effect and time-varying systematic risk parameter (β), which is recommended to tackle the classical event study problem of detecting the exact timing of the event.

Details

Journal of Financial Reporting and Accounting, vol. 18 no. 3
Type: Research Article
ISSN: 1985-2517

Keywords

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Article
Publication date: 30 October 2009

Even Fallan and Lars Fallan

The purpose of this paper is to explore the development of environmental disclosure during periods of voluntarism and during periods with changed statutory requirements…

Abstract

Purpose

The purpose of this paper is to explore the development of environmental disclosure during periods of voluntarism and during periods with changed statutory requirements. More specific, the question is how volume and content variety of environmental disclosure in financial statements are immediately affected by statutory regulations.

Design/methodology/approach

In order to compare the effects of such regulations with the development in environmental disclosure during periods without any changes in statutory requirements, a longitudinal study is conducted to test five specific hypotheses. A quasi‐experiment with pre‐ and post‐testing of disclosure volume and content variety is carried out to test the effects of the statutory changes.

Findings

The most important lesson from this paper is the significance of the voluntary approach to improve the variety of environmental disclosure. The present paper supports the claim of voluntarism that companies will meet the heterogeneous requirements of their stakeholders without any governmental regulations. No statutory regulations are needed to make the companies increase and adapt their environmental disclosure to the demand from their stakeholders and legitimate their existence towards society. The present paper has revealed that the regulation approach has a significant, immediate effect on mandatory environmental disclosure only, and that companies do not fully comply with such statutory regulations.

Research limitations/implications

There is no universal notion of voluntarism. Different countries and societies have different legal requirements and political cultures regarding voluntarism. That is, voluntary reporting in Norway is affected by the national statutory requirements and may be underpinned by a certain set of societal responsibilities that may or may not exist elsewhere. Further research is needed to see whether these findings are readily generalized or whether they should only be interpreted in light of local considerations.

Originality/value

This is the first comprehensive study of the development of environmental disclosure in Norwegian companies. A total of 822 financial statements and annual reports, during the period between 1987 and 2005, are analysed.

Details

Journal of Accounting & Organizational Change, vol. 5 no. 4
Type: Research Article
ISSN: 1832-5912

Keywords

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Article
Publication date: 17 December 2019

Fatima Yusuf and Amna Yousaf

The purpose of this paper is to investigate if market discipline and legal environment are sufficient to motivate firms to disclose optimal level of corporate information…

Abstract

Purpose

The purpose of this paper is to investigate if market discipline and legal environment are sufficient to motivate firms to disclose optimal level of corporate information voluntarily in the context of a developing country that is Pakistan. Furthermore, it was examined if regulators have sufficient regulatory capacity to influence the extent up to which politically connected companies disclose corporate information.

Design/methodology/approach

An in-depth investigation was carried out through qualitative content analysis of 200 annual reports from 40 companies listed on Karachi Stock Exchange along with 26 semi-structured interviews from experts in the field of corporate governance.

Findings

Findings from the research indicated that there is an absence of culture for disclosure of information and country’s existing institutional environment is not sufficiently strong to support self-regulation or voluntary disclosure of information. It is argued that stringent disclosure regulation results in better flow of information in politically connected companies and helps in curbing opportunistic behaviour.

Practical implications

This research carries significant policy implications. It is proposed that in addition to mandatory disclosure requirements, the code of corporate governance should indicate desirable disclosure levels for voluntary corporate information as well.

Originality/value

This is the first study to examine the effectiveness of role and usefulness of mandatory corporate disclosure regulation, voluntary disclosure practices, and capacity of regulators to enhance dissemination of corporate information in a developing country with high levels of political corruption and cronyism through an in-depth research.

Details

Journal of Accounting in Emerging Economies, vol. 10 no. 1
Type: Research Article
ISSN: 2042-1168

Keywords

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Article
Publication date: 3 September 2018

Claudia Arena, Ronald Liong and Petros Vourvachis

Motivated by legitimacy theory, this paper aims to examine comprehensively corporate social responsibility (CSR) disclosure in Southeast Asian (Association of Southeast…

Abstract

Purpose

Motivated by legitimacy theory, this paper aims to examine comprehensively corporate social responsibility (CSR) disclosure in Southeast Asian (Association of Southeast Asian Nations [ASEAN]) countries with the aim of disentangling whether such disclosures are the result of a proactive stance or a reaction to regulations.

Design/methodology/approach

After a content analysis of CSR stand-alone reports that relies on the Global Reporting Initiative as the basis for comparison, a multivariate analysis is carried out while controlling for firm-specific incentives and industry, country and year fixed effects.

Findings

The paper finds that CSR disclosure increased across the entire ASEAN. Although this increase cannot be directly ascribed to the introduction of regulations in Indonesia and Malaysia, the latter may have impacted choices of disclosure media. In countries where reporting requirements have become mandated, mandatory reporters show low levels, and voluntary reporters high levels, of CSR disclosure. The paper also finds that the attainment of CSR awards is related to disclosure. Additional analyses reveal a substitution effect between voluntary and mandatory incentives in countries with high levels of law enforcement.

Practical implications

The evidence suggests that the introduction of regulations can be effective in improving the level and breadth of CSR reporting only in the presence of institutions that ensure the enforcement of the disclosure regulations.

Social implications

The evidence suggests that organizations are reluctant to report on issues such as child labor, human rights and corruption. Organizations opportunistically employ related disclosure strategies that deviate from the underlying CSR performance.

Originality/value

The paper analyzes not only the level and breadth of CSR disclosure but also the motivation for its use across the still under-investigated ASEAN area, thus allowing an examination of the influence of institutional incentives above and beyond the firm-specific factors that drive CSR activities.

Details

Sustainability Accounting, Management and Policy Journal, vol. 9 no. 4
Type: Research Article
ISSN: 2040-8021

Keywords

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Article
Publication date: 1 March 2006

Russel Poskitt and Peihong Yang

This study investigates the impact of the enhanced continuous disclosure regime introduced in December 2002 on several measures of information risk in NZX‐listed stocks…

Abstract

This study investigates the impact of the enhanced continuous disclosure regime introduced in December 2002 on several measures of information risk in NZX‐listed stocks. We employ two microstructure models and an intraday data set to measure information risk in a sample of 71 stocks. Our empirical results show that the reforms enacted in December 2002 had no significant effect on either the level of information‐based trading or the adverse selection component of market spreads in our sample of NZX‐listed stocks.

Details

Pacific Accounting Review, vol. 18 no. 1
Type: Research Article
ISSN: 0114-0582

Keywords

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