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New research on corporate disclosure from Harvard Business School faculty on issues including the strategic disclosure choices made in crafting directors' biographies, and how the equity market responds to the adoption of mandatory nonfinancial disclosure.
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Capitalism Works Better When I Can See What You're Doing

by Sean Silverthorne

Lower prices. More innovation. Better government. Transparency fuels the basic principles of competitive business and open government. Well, most of the time. Open for comment; 0 Comments.

The Bulletproof Glass Effect: When Privacy Notices Backfire

by Aaron R. Brough, David A. Norton, and Leslie John

Consumers regularly encounter privacy notices explaining if and how their personal information will be collected, stored, used, and shared. Evidence in this study demonstrates that privacy notices, though designed to promote a sense of confidence that personal data will not be misused, can undermine consumer trust and decrease purchase intent.

Shareholder Activism and Firms’ Voluntary Disclosure of Climate Change Risks

by Caroline Flammer, Michael W. Toffel, and Kala Viswanathan

Shareholder resolutions typically fail, and often by a wide margin. So why do active investors bother? It turns out that resolutions nonetheless can influence corporate transparency. Specifically, after being targeted with shareholder resolutions on environmental topics, this research shows that companies are more likely to publicly disclose their climate change risks—and that such disclosure increases these companies’ valuation.

Complex Disclosure

by Ginger Zhe Jin, Michael Luca, and Daniel Martin

This study shows that companies looking to hide unfavorable information might strategically be making contract terms unnecessarily complex, harming consumers and undermining the effectiveness of disclosure. These results highlight a role for regulation that would encourage simpler forms of disclosure.

If the CEO’s High Salary Isn't Justified to Employees, Firm Performance May Suffer

by Dina Gerdeman

Researcher Ethan Rouen discovers that rank-and-file employees understand the boss deserves a big salary, but only when the number is fully explained. Open for comment; 0 Comments.

Rethinking Measurement of Pay Disparity and Its Relation to Firm Performance

by Ethan Rouen

Among this paper’s contributions is evidence that different types of pay disparity matter in different ways to firm employees, and that disparity created by pay that is unrelated to the economics of the firm negatively impacts employee satisfaction, with consequences for firm performance. The paper also gives investors and proxy advisors a roadmap to interpret pay ratios and pay disparity. This roadmap may help regulators and firms to, respectively, mandate and prepare more informative disclosures.

Catering Through Disclosure: Evidence from Shanghai-Hong Kong Connect

by Aaron S. Yoon

The researcher studies firms’ use of disclosure to build investor confidence when they operate in a market where the institutions that support the supply of credible information are weak.

Stock Price Synchronicity and Material Sustainability Information

by Jody Grewal, Clarissa Hauptmann, and George Serafeim

This paper seeks to understand and provide evidence on the characteristics of emerging accounting standards for sustainability information. Given that a large number of institutional investors seek sustainability data and have committed to using it, it is increasingly important to develop a robust accounting infrastructure for the reporting of such information.

Managing Reputation: Evidence from Biographies of Corporate Directors

by Ian D. Gow, Aida Sijamic Wahid, and Gwen Yu

A biography is part of a proxy statement summarizing a director’s past experience. For this study the authors analyzed almost 160,000 biographies of 12,895 directors to see how directors appear to make strategic disclosure choices about their past and current experience in biographies. Directors are less likely to disclose past and current directorships at firms that experienced adverse events such as accounting restatements, securities litigation, or bankruptcy. Directors who withhold information about adverse-event directorships experience a more favorable stock price reactions at appointment and lose fewer current directorships in the two years after the filing relative to the directors who disclose. However, there is no evidence that non-disclosure leads to different shareholder voting outcomes.

What Do Measures of Real-Time Corporate Sales Tell Us About Earnings Surprises and Post-announcement Returns?

by Kenneth A. Froot, Namho Kang, Gideon Ozik, and Ronnie Sadka

This study by Kenneth A. Froot and colleagues show that managers’ departures from the Timely Disclosure Hypothesis—the notion that managers release through available announcement channels all of their then-current private information—may be sensitive to post-quarter private information managers have obtained. Managers may act through their stock trading to benefit from these departures.

Market Reaction to Mandatory Nonfinancial Disclosure

by Jyothika Grewal, Edward J. Riedl & George Serafeim

How does the equity market respond to the adoption of mandatory nonfinancial disclosure? Research by George Serafeim and colleagues.

Deconstructing the Price Tag

by Dina Gerdeman

A new study by Bhavya Mohan, Ryan Buell, and Leslie John has an important conclusion for retailers: Explaining what it costs to produce a product can potentially increase its sales. Open for comment; 0 Comments.