The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research

Christian Leuz, Peter Wysocki

Research output: Contribution to journalArticle

180 Citations (Scopus)

Abstract

This paper discusses the empirical literature on the economic consequences of disclosure and financial reporting regulation, drawing on U.S. and international evidence. Given the policy relevance of research on regulation, we highlight the challenges with (1) quantifying regulatory costs and benefits, (2) measuring disclosure and reporting outcomes, and (3) drawing causal inferences from regulatory studies. Next, we discuss empirical studies that link disclosure and reporting activities to firm-specific and market-wide economic outcomes. Understanding these links is important when evaluating regulation. We then synthesize the empirical evidence on the economic effects of disclosure regulation and reporting standards, including the evidence on International Financial Reporting Standards (IFRS) adoption. Several important conclusions emerge. We generally lack evidence on market-wide effects and externalities from regulation, yet such evidence is central to the economic justification of regulation. Moreover, evidence on causal effects of disclosure and reporting regulation is still relatively rare. We also lack evidence on the real effects of such regulation. These limitations provide many research opportunities. We conclude with several specific suggestions for future research.

Original languageEnglish (US)
Pages (from-to)525-622
Number of pages98
JournalJournal of Accounting Research
Volume54
Issue number2
DOIs
StatePublished - May 1 2016

Fingerprint

Disclosure
Financial reporting
Economics
Justification
Regulatory costs
Empirical study
Costs and benefits
Causal inference
Externalities
International Financial Reporting Standards
Economic effect
Empirical evidence
Disclosure regulation
Causal effect
Economic consequences

Keywords

  • Accounting standards
  • Capital markets
  • Cost-benefit analysis
  • Disclosure
  • IFRS
  • Institutional economics
  • International accounting
  • Political economy
  • Real effects
  • Regulation
  • Transparency

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Cite this

The Economics of Disclosure and Financial Reporting Regulation : Evidence and Suggestions for Future Research. / Leuz, Christian; Wysocki, Peter.

In: Journal of Accounting Research, Vol. 54, No. 2, 01.05.2016, p. 525-622.

Research output: Contribution to journalArticle

@article{8b4d9c19342b4d8383ca88b0bb29d784,
title = "The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research",
abstract = "This paper discusses the empirical literature on the economic consequences of disclosure and financial reporting regulation, drawing on U.S. and international evidence. Given the policy relevance of research on regulation, we highlight the challenges with (1) quantifying regulatory costs and benefits, (2) measuring disclosure and reporting outcomes, and (3) drawing causal inferences from regulatory studies. Next, we discuss empirical studies that link disclosure and reporting activities to firm-specific and market-wide economic outcomes. Understanding these links is important when evaluating regulation. We then synthesize the empirical evidence on the economic effects of disclosure regulation and reporting standards, including the evidence on International Financial Reporting Standards (IFRS) adoption. Several important conclusions emerge. We generally lack evidence on market-wide effects and externalities from regulation, yet such evidence is central to the economic justification of regulation. Moreover, evidence on causal effects of disclosure and reporting regulation is still relatively rare. We also lack evidence on the real effects of such regulation. These limitations provide many research opportunities. We conclude with several specific suggestions for future research.",
keywords = "Accounting standards, Capital markets, Cost-benefit analysis, Disclosure, IFRS, Institutional economics, International accounting, Political economy, Real effects, Regulation, Transparency",
author = "Christian Leuz and Peter Wysocki",
year = "2016",
month = "5",
day = "1",
doi = "10.1111/1475-679X.12115",
language = "English (US)",
volume = "54",
pages = "525--622",
journal = "Journal of Accounting Research",
issn = "0021-8456",
publisher = "Wiley-Blackwell",
number = "2",

}

TY - JOUR

T1 - The Economics of Disclosure and Financial Reporting Regulation

T2 - Evidence and Suggestions for Future Research

AU - Leuz, Christian

AU - Wysocki, Peter

PY - 2016/5/1

Y1 - 2016/5/1

N2 - This paper discusses the empirical literature on the economic consequences of disclosure and financial reporting regulation, drawing on U.S. and international evidence. Given the policy relevance of research on regulation, we highlight the challenges with (1) quantifying regulatory costs and benefits, (2) measuring disclosure and reporting outcomes, and (3) drawing causal inferences from regulatory studies. Next, we discuss empirical studies that link disclosure and reporting activities to firm-specific and market-wide economic outcomes. Understanding these links is important when evaluating regulation. We then synthesize the empirical evidence on the economic effects of disclosure regulation and reporting standards, including the evidence on International Financial Reporting Standards (IFRS) adoption. Several important conclusions emerge. We generally lack evidence on market-wide effects and externalities from regulation, yet such evidence is central to the economic justification of regulation. Moreover, evidence on causal effects of disclosure and reporting regulation is still relatively rare. We also lack evidence on the real effects of such regulation. These limitations provide many research opportunities. We conclude with several specific suggestions for future research.

AB - This paper discusses the empirical literature on the economic consequences of disclosure and financial reporting regulation, drawing on U.S. and international evidence. Given the policy relevance of research on regulation, we highlight the challenges with (1) quantifying regulatory costs and benefits, (2) measuring disclosure and reporting outcomes, and (3) drawing causal inferences from regulatory studies. Next, we discuss empirical studies that link disclosure and reporting activities to firm-specific and market-wide economic outcomes. Understanding these links is important when evaluating regulation. We then synthesize the empirical evidence on the economic effects of disclosure regulation and reporting standards, including the evidence on International Financial Reporting Standards (IFRS) adoption. Several important conclusions emerge. We generally lack evidence on market-wide effects and externalities from regulation, yet such evidence is central to the economic justification of regulation. Moreover, evidence on causal effects of disclosure and reporting regulation is still relatively rare. We also lack evidence on the real effects of such regulation. These limitations provide many research opportunities. We conclude with several specific suggestions for future research.

KW - Accounting standards

KW - Capital markets

KW - Cost-benefit analysis

KW - Disclosure

KW - IFRS

KW - Institutional economics

KW - International accounting

KW - Political economy

KW - Real effects

KW - Regulation

KW - Transparency

UR - http://www.scopus.com/inward/record.url?scp=84963568354&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84963568354&partnerID=8YFLogxK

U2 - 10.1111/1475-679X.12115

DO - 10.1111/1475-679X.12115

M3 - Article

AN - SCOPUS:84963568354

VL - 54

SP - 525

EP - 622

JO - Journal of Accounting Research

JF - Journal of Accounting Research

SN - 0021-8456

IS - 2

ER -