Bird, Andrew and Karolyi, Stephen A. and Ruchti, Thomas G., Regulating Information (October 18, 2016). Available for download at SSRN: https://ssrn.com/abstract=2901650

“The SEC regulates and standardizes information production in financial markets through financial reporting standards. With a novel dataset exploiting institutional features of the standard setting process. On average, standards increase aggregate market value by 0.93%, although discord among market participants moderates this positive effect. We construct a firm-level measure of ex ante sensitivity to information regulation and find that the information content of subsequent information events is higher for sensitive firms. Increased information content comes from negative news, consistent with regulation constraining discretionary disclosure. Information regulation improves capital allocation by reducing asymmetric information in financial markets.”