Turning Back the Clock on Disclosure Regulation? – Evidence from the Termination of the Quarterly Reporting Mandate in Europe

We investigate economic consequences of the deregulation of quarterly reporting in member states of the European Union, as stipulated by the amended Transparency Directive in 2013. We observe that subsequent to this deregulation, only relatively few firms reduced reporting frequency by switching from quarterly reporting to semi-annual reporting. Using a difference-in-differences design, we then explore the capital market and investment (real) effects of the deregulation. We find that on average, firms that chose to terminate quarterly reporting experienced reductions in liquidity, and increased their long-term investments. These results are robust to controlling for endogeneity, and point at both, potential economic benefits (less short-termism) and losses (reduced transparency) of the deregulation. Our findings represent rare evidence on economic consequences of disclosure deregulation, suggesting that prior regulatory effects can be potentially reversed, effectively “turning back the clock”. This finding is of potential interest not only to researchers, but also to policy-makers and securities regulators.