Working Paper: CEPR ID: DP12776
Authors: Marc Badia; Miguel Duro; Bjorn N. Jorgensen; Gaizka Ormazabal
Abstract: We exploit two regulatory shocks to examine the informational effects of tightening pre-existing mandatory disclosure rules. Canadian Rule NI 51-101 and the US “Modernization of Oil and Gas Reporting” introduced a quasi-identical tightening of the rules governing oil and gas reserve disclosures in Canada and the US at different times. Both in Canada and the US, we document significant changes in firms’ reporting outcomes when the new regulation is introduced. We also find that the reserve disclosures filed under the new regulations are more closely associated with stock price changes and with decreases in bid-ask spreads. Our findings are robust to controlling for other confounding factors such as time trends, other information disclosed simultaneously, financial reporting incentives, mispricing and monitoring efforts.
Keywords: Disclosure Rules; Disclosure of Oil and Gas Reserves
JEL Codes: M41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Introduction of NI 51101 in Canada and MOGR in the US (L64) | Altered firms' reporting outcomes (G34) |
| Altered firms' reporting outcomes (G34) | More informative disclosures of oil and gas reserves (L71) |
| More informative disclosures of oil and gas reserves (L71) | Increased stock price sensitivity (G19) |
| Increased stock price sensitivity (G19) | Decrease in bid-ask spreads (G19) |
| Regulatory changes (G18) | Decrease in information asymmetry (D83) |