Information gathering is an instinctive response to uncertainty, but such efforts may not fully resolve the uncertainty that prompted them. This implies that proxies for investor information gathering may endogenously reflect investor uncertainty, not only before but also after information collection. I find evidence consistent with this pattern using data on public internet access of SEC filings around firms’ earnings announcements. My findings suggest that proxies for investor search and information gathering can capture both information demand and unresolved uncertainty, which has implications for the interpretation of common empirical tests involving such proxies. Controlling for the uncertainty that motivates information gathering is a potential approach for addressing this endogeneity issue. However, my findings indicate that firm-specific information gathering reflects unique information about firm-level investor uncertainty not captured by common controls for uncertainty. Analyses that exploit plausibly exogenous variation in information gathering suggest a promising direction for future research.

The SEC prohibits the presentation of non‐GAAP measures before corresponding GAAP measures; however, a large proportion of non‐GAAP reporters present non‐GAAP EPS before GAAP EPS in their earnings announcements. This noncompliance raises questions about whether firms use prominence to highlight higher or lower quality non‐GAAP information. For firms reporting non‐GAAP EPS between 2003 and 2016, prominent non‐GAAP EPS is associated with higher quality non‐GAAP reporting. Further tests reveal that nonregulatory incentives, rather than regulatory costs, explain this relation. Specifically, prominence is associated with higher quality non‐GAAP reporting in settings where prominence is not regulated, investors ignore prominence when non‐GAAP reporting quality is lower, and the minority of firms using prominence to mislead exhibit characteristics associated with weaker investor monitoring. Overall, we provide evidence that regulatory noncompliance can reflect an intent to inform, and that most firms use prominence to highlight higher quality non‐GAAP information despite prohibitive regulation.

As of November 2016, SEC Regulation (“Reg”) AB II requires issuers of certain types of asset‐backed securities (“ABS”) to disclose the credit‐risk attributes of each asset in the underlying pool, a substantial expansion of prior disclosure requirements. We examine how ABS issuers’ asset‐level disclosures under Reg AB II affect the (e)valuation of ABS by investors and credit rating agencies. Using difference‐in‐differences models that compare affected and unaffected types of ABS, we find that these disclosures improve the ability of initial ABS yields and credit ratings to predict the performance of the underlying assets. These results are concentrated in deals with above‐median risk layering in the underlying assets and complexity in the tranching of credit risk. We further find that asset‐level disclosures are associated with lower yields. Lastly, we provide evidence that most prospective ABS investors download asset‐level information during the price formation period prior to ABS issuance.

Regulation is often proposed, developed, and finalized over a lengthy rule-making period prior to its adoption. We examine the period over which banking authorities discussed, adopted, and implemented Basel III to understand how firms respond to proposed regulation. We find evidence to suggest that affected banks not only lobbied rule-makers against it but also made strategic financial reporting changes and altered their business models in ways that reduced their exposure to the proposed rule prior to rule-makers finalizing the regulation. Further, our results indicate a sequential response, with banks responding through lobbying and strategic financial reporting prior to making business model changes. These findings highlight the interplay among firms’ financial reporting, business model, and political choices in response to proposed regulation and indicate that the appropriate date for an event study may be the regulation’s announcement date rather than its adoption or implementation dates.

A dedicated investor relations (IR) function facilitates direct and ongoing dialog between management and shareholders. This paper examines whether this form of engagement mitigates activism that relies upon support from other shareholders. We find that IR engagement is associated with increased investor confidence in management and the board, as well as a lower likelihood of activism, with this deterrent effect becoming stronger when there are fewer frictions surrounding the development of mutual understanding and trust with investors. We also find that when firms do experience an activist campaign, firms with IR engagement have less costly and contentious campaigns, including a lower likelihood of CEO turnover, than those without such a commitment. Taken together, our findings suggest that direct and ongoing IR engagement is an important factor in achieving mutual understanding and trust between the firm and its shareholders, which deters activist investors and mitigates the costly escalation of initiated campaigns.