[This paper provides evidence that firms with high disclosure quality ratings from financial analysts enjoy a lower effective interest cost of issuing debt. This finding is consistent with the argument that a policy of timely and detailed disclosures reduces lenders' and underwriters' perception of default risk for the disclosing firm, reducing its cost of debt. The results also indicate that the relative importance of disclosures is greater in situations where there is greater market uncertainty about the firm as reflected by the variance of stock returns. Since debt financing is an important source of external financing for publicly traded firms, the results have important implications on our understanding of the motives and consequences of corporate disclosures.]

This paper provides evidence that firms with high disclosure quality ratings from financial analysis enjoy a lower effective interest cost of issuing debt. This findings is consistent with the argument that a policy of timely and detailed disclosures reduces lenders' and underwriters' perception of default risk for the disclosing firm, reducing its constant of debt. The results also indicate that the relative importance of disclosures is greater in situations where there is greater market uncertainty about the firm as reflected by the variance of stock returns. Since debt financial is an important source of external financing for publicly traded firms, the results have important implications on our understanding of the motives and consequences of corporate disclosures.

We investigate the relation of the board of directors and institutional ownership with the properties of management earnings forecasts. We find that firms with more outside directors and greater institutional ownership are more likely to issue a forecast and are inclined to forecast more frequently. In addition, these forecasts tend to be more specific, accurate and less optimistically biased. These results are robust to changes specification, Granger causality tests, and simultaneous equation analyses. The results are similar in the pre– and post–Regulation Fair Disclosure (Reg FD) eras. Additional analysis suggests that concentrated institutional ownership is negatively associated with forecast properties. This association is less negative in the post–Reg FD environment, which is consistent with Reg FD reducing the ability of firms to privately communicate information to select audiences.

We examine the relationship between a firm's disclosure quality and equity‐based compensation of independent members of the board of directors. The dimensions of disclosure quality we focus on are management's earnings guidance and information flowthrough financial analysts. Using both levels and changes specifications, we find the average ratio of equity‐based pay to total pay of independent board members to be positively related to a firm's disclosure quality. Our findings are robust to the inclusion of management's equity‐based compensation, other governance measures, and financial controls, and robust to instrumental variable tests of endogeneity. Furthermore, we find directors’ equity‐based compensation to be negatively associated with the firm's cost of equity capital. Our results are consistent with equity‐based compensation providing incentives to independent directors to push for better disclosure quality.

This paper explores the potential role of anti-takeover provisions (ATPs) in long-term value creation. Using a change in the legal environment in Delaware as an exogenous event, we document that a subset of firms with a relatively longer term focus (innovative firms) benefit from ATPs. Particularly, these firms experience an increase in Tobin's Q following a state law change in Delaware that increases the effectiveness of ATPs in defending against hostile takeovers. This increase is greater than that for non-innovative firms in Delaware as well as for innovative firms outside Delaware. Furthermore, the innovative firms in Delaware experience a stronger positive market reaction around the state law change dates, relative to other firms. Finally, in a cross-sectional setting we find that innovative firms with above-average takeover protection outperform other firms and are less likely to engage in harmful real earnings management. Taken together, these results provide empirical evidence of potential benefits of ATPs and help explain why such protection continues to be prevalent in the United States.