Schmalenbach Business Review

, Volume 71, Issue 2, pp 137–168 | Cite as

Shaping Corporate Actions Through Targeted Transparency Regulation: A Framework and Review of Extant Evidence

  • Katharina Hombach
  • Thorsten SellhornEmail author
Original Article


This paper discusses targeted transparency regulation by securities regulators: corporate disclosure regulation aimed at nudging firms towards changing their business activities in socially desirable ways. Using Corporate Social Responsibility disclosures and other prominent examples, we first document disclosure regulators’ public policy objectives. Based on a framework that develops the causal chain linking a disclosure mandate to the desired corporate action, we review empirical evidence on the effectiveness of targeted transparency implemented via securities regulation. The paper concludes with a discussion of opportunities and challenges for future research in this area.


Disclosure Transparency Public policy CSR Real effects 

JEL classification

M14 M48 Q38 Q56 



We thank Tanja Zohner, two anonymous reviewers and Alfred Wagenhofer (the editor) for valuable comments. Alexander Paulus provided excellent research assistance.


  1. Amel-Zadeh, A., and G. Serafeim. 2017. Why and how investors use ESG information. Evidence from a global survey. Working Paper.Google Scholar
  2. Andreoni, J. 1990. Impure altruism and donations to public goods. A theory of warm-glow giving. The Economic Journal 100(401):464–477.Google Scholar
  3. Arnold, M.C., and R. Grasser. 2018. What is a fair amount of executive compensation? Outrage potential of two key stakeholder groups. Journal of Business Finance & Accounting 45(5–6):651–685.Google Scholar
  4. Ball, R., A. Robin, and J.S. Wu. 2003. Incentives versus standards. Properties of accounting income in four East Asian countries. Journal of Accounting and Economics 36(1–3):235–270.Google Scholar
  5. Banerjee, S., J. Davis, and N. Gondhi. 2018. When transparency improves, must prices reflect fundamentals better? The Review of Financial Studies 31(6):2377–2414.Google Scholar
  6. Bebbington, J., E.A. Kirk, and C. Larrinaga. 2012. The production of normativity. A comparison of reporting regimes in Spain and the UK. Accounting, Organizations and Society 37(2):78–94.Google Scholar
  7. Becker, G.S. 1974. A theory of social interactions. Journal of Political Economy 82(6):1063–1093.Google Scholar
  8. Bénabou, R., and J. Tirole. 2010. Individual and corporate social responsibility. Economica 77(305):1–19.Google Scholar
  9. Beyer, A., D.A. Cohen, T.Z. Lys, and B.R. Walther. 2010. The financial reporting environment. Review of the recent literature. Journal of Accounting and Economics 50(2):296–343.Google Scholar
  10. Birkey, R.N., R.P. Guidry, M.A. Islam, and D.M. Patten. 2018. Mandated social disclosure: An analysis of the response to the California Transparency in Supply Chains Act of 2010. Journal of Business Ethics 152(3):827–841.Google Scholar
  11. Bischof, J., and H. Daske. 2013. Mandatory disclosure, voluntary disclosure, and stock market liquidity. Evidence from the EU bank stress tests. Journal of Accounting Research 51(5):997–1029.Google Scholar
  12. Brüggemann, U., J.-M. Hitz, and T. Sellhorn. 2013. Intended and unintended consequences of mandatory IFRS adoption. A review of extant evidence and suggestions for future research. European Accounting Review 22(1):1–37.Google Scholar
  13. Calveras, A., and J.-J. Ganuza. 2016. The role of public information in corporate social responsibility. Journal of Economics & Management Strategy 25(4):990–1017.Google Scholar
  14. Chatterji, A.K., and M.W. Toffel. 2010. How firms respond to being rated. Strategic Management Journal 31(9):917–945.Google Scholar
  15. Chauvey, J.-N., S. Giordano-Spring, C.H. Cho, and D.M. Patten. 2015. The normativity and legitimacy of CSR disclosure. Evidence from France. Journal of Business Ethics 130(4):789–803.Google Scholar
  16. Chelli, M., S. Durocher, and A. Fortin. 2018. Normativity in environmental reporting: a comparison of three regimes. Journal of Business Ethics 149(2):285–311.Google Scholar
  17. Chen, Y.-C., M. Hung, and Y. Wang. 2018. The effect of mandatory CSR disclosure on firm profitability and social externalities. Evidence from China. Journal of Accounting and Economics 65(1):169–190.Google Scholar
  18. Choudhury, B. 2015. Social disclosure. Berkeley Business Law Journal 13(1):183–216.Google Scholar
  19. Christensen, H.B., E. Floyd, L.Y. Liu, and M. Maffett. 2017. The real effects of mandated information on social responsibility in financial reports. Evidence from mine-safety records. Journal of Accounting and Economics 64(2):284–304.Google Scholar
  20. Christensen, H.B., E. Floyd, and M. Maffett. 2018. The effects of charge-price transparency regulation on prices in the healthcare industry. Working Paper.Google Scholar
  21. Cochrane, J.H. 2014. Challenges for cost-benefit analysis of financial regulation. The Journal of Legal Studies 43(2):63–105.Google Scholar
  22. Coffee, J.C. 1984. Market failure and the economic case for a mandatory disclosure system. Virginia Law Review 70(4):717–753.Google Scholar
  23. Core, J.E., W. Guay, and D.F. Larcker. 2008. The power of the pen and executive compensation. Journal of Financial Economics 88(1):1–25.Google Scholar
  24. Deegan, C., and C. Blomquist. 2006. Stakeholder influence on corporate reporting. An exploration of the interaction between WWF-Australia and the Australian minerals industry. Accounting, Organizations and Society 31(4):343–372.Google Scholar
  25. DellaVigna, S. 2009. Psychology and economics. Evidence from the field. Journal of Economic Literature 47(2):315–372.Google Scholar
  26. Dhooge, L.J. 2014. The First Amendment and disclosure regulations. Compelled speech or corporate opportunism? American Business Law Journal 51(3):599–659.Google Scholar
  27. Dimson, E., O. Karakaş, and X. Li. 2015. Active ownership. The Review of Financial Studies 28(12):3225–3268.Google Scholar
  28. Dombalagian, O. 2016. Principles for publicness. Florida Law Review 67(2):649–709.Google Scholar
  29. Doshi, A.R., G.W.S. Dowell, and M.W. Toffel. 2013. How firms respond to mandatory information disclosure. Strategic Management Journal 34(10):1209–1231.Google Scholar
  30. Dranove, D., and G.Z. Jin. 2010. Quality disclosure and certification. Theory and practice. Journal of Economic Literature 48(4):935–963.Google Scholar
  31. Dranove, D., D. Kessler, M. McClellan, and M. Satterthwaite. 2003. Is more information better? The effects of “report cards” on health care providers. Journal of Political Economy 111(3):555–588.Google Scholar
  32. Duflo, E., M. Greenstone, R. Pande, and N. Ryan. 2013. Truth-telling by third-party auditors and the response of polluting firms: experimental evidence from India. The Quarterly Journal of Economics 128(4):1499–1545.Google Scholar
  33. Dyck, A., L. Zingales, and N. Volchkova. 2008. The corporate governance role of the media. Evidence from Russia. The Journal of Finance 63(3):1093–1135.Google Scholar
  34. Dyreng, S.D., J.L. Hoopes, and J.H. Wilde. 2016. Public pressure and corporate tax behavior. Journal of Accounting Research 54(1):147–186.Google Scholar
  35. European Commission. 2011. A renewed EU strategy 2011–14 for Corporate Social Responsibility, COM(2011) 681 final Google Scholar
  36. European Commission. 2013. Impact assessment, SWD(2013) 127 final Google Scholar
  37. European Commission. 2016. Commission decision regarding the follow-up to national parliaments’ opinions—reply to the Assemblée nationale, C(2016) 8597 final Google Scholar
  38. European Securities and Markets Authority. 2018. Who we are. Accessed 16 December 2018.Google Scholar
  39. Fiechter, P., J.-M. Hitz, and N. Lehmann. 2018. Real effects in anticipation of mandatory disclosures. Evidence from the European Union’s CSR directive. Working Paper.Google Scholar
  40. Friedman, H.L., and M.S. Heinle. 2016. Taste, information, and asset prices. Implications for the valuation of CSR. Review of Accounting Studies 21(3):740–767.Google Scholar
  41. Fung, A., M. Graham, and D. Weil. 2007. Full disclosure: the perils and promise of transparency, 1st edn., Cambridge: Cambridge University Press.Google Scholar
  42. Glaeser, S., and W.R. Guay. 2017. Identification and generalizability in accounting research. A discussion of Christensen, Floyd, Liu, and Maffett. Journal of Accounting and Economics 64(2–3):305–312.Google Scholar
  43. Goldstein, I., and L. Yang. 2017. Information disclosure in financial markets. Annual Review of Financial Economics 9:101–125.Google Scholar
  44. Goshen, G., and Z. Parchomovsky. 2006. The essential role of securities regulation. Duke Law Journal 55(4):711–782.Google Scholar
  45. Gramlich, J., and L. Huang. 2017. The effect of mandated CSR disclosure on the pollution levels of publicly-traded Chinese firms. Working Paper.Google Scholar
  46. Grewal, J., E.J. Riedl, and G. Serafeim. 2018. Market reaction to mandatory nonfinancial disclosure. Management Science.
  47. Healy, P., and G. Serafeim. 2015. Voluntary, self-regulatory and mandatory disclosure of oil and gas company payments to foreign governments. Working Paper.Google Scholar
  48. Hombach, K., and T. Sellhorn. 2018. Firm value effects of targeted disclosure regulation: the role of reputational costs. Working Paper.Google Scholar
  49. Hoopes, J.L., L. Robinson, and J. Slemrod. 2018. Public tax-return disclosure. Journal of Accounting and Economics 66:142–162.Google Scholar
  50. Howard, S. 1932. Public rules for private accounting in France, 1673 and 1807. The Accounting Review 7(2):91–102.Google Scholar
  51. Huang, X., and L. Watson. 2015. Corporate social responsibility research in accounting. Journal of Accounting Literature 34:1–16.Google Scholar
  52. Humbert, F. 2019. Sustainability reporting: A critical assessment of the E.U. CSR Directive and its German implementation from a human rights perspective. Schmalenbach Business Review.
  53. Ioannou, I., and G. Serafeim. 2017. The consequences of mandatory corporate sustainability reporting. Working Paper..Google Scholar
  54. Islam, M.A., and C.J. van Staden. 2018. Social movement NGOs and the comprehensiveness of conflict mineral disclosures: evidence from global companies. Accounting, Organizations and Society 65:1–19.Google Scholar
  55. Jin, G.Z., and P. Leslie. 2003. The effect of information on product quality. Evidence from restaurant hygiene grade cards. The Quarterly Journal of Economics 118(2):409–451.Google Scholar
  56. Johannesen, N., and D.T. Larsen. 2016. The power of financial transparency. An event study of country-by-country reporting standards. Economics Letters 145:120–122.Google Scholar
  57. Johnson, J. 2017. The influence of alternative CSR reporting models on managers’ capital allocation decisions. Working Paper..Google Scholar
  58. Kanodia, C., and H. Sapra. 2016. A real effects perspective to accounting measurement and disclosure. Implications and insights for future research. Journal of Accounting Research 54(2):623–676.Google Scholar
  59. Karmel, R.S. 2016. Disclosure reform. The SEC is riding off in two directions at once. The Business Lawyer 71(3):781–834.Google Scholar
  60. Kim, Y.H., and G.F. Davis. 2016. Challenges for global supply chain sustainability. Evidence from conflict minerals reports. Academy of Management Journal 59(6):1896–1916.Google Scholar
  61. Kuhnen, C.M., and A. Niessen. 2012. Public opinion and executive compensation. Management Science 58(7):1249–1272.Google Scholar
  62. Langevoort, D., and R. Thompson. 2013. “Publicness” in contemporary securities regulation after the JOBS act. The Georgetown Law Journal 101:337–386.Google Scholar
  63. Larrinaga, C., F. Carrasco, C. Correa, F. Llena, and J. Moneva. 2002. Accountability and accounting regulation. The case of the Spanish environmental disclosure standard. European Accounting Review 11(4):723–740.Google Scholar
  64. Leuz, C., and P.D. Wysocki. 2016. The economics of disclosure and financial reporting regulation. Evidence and suggestions for future research. Journal of Accounting Research 54(2):525–622.Google Scholar
  65. Liang, H., and L. Renneboog. 2017. On the foundations of corporate social responsibility. The Journal of Finance 72(2):853–910.Google Scholar
  66. List, J.A. 2006. The behavioralist meets the market. Measuring social preferences and reputation effects in actual transactions. Journal of Political Economy 114(1):1–37.Google Scholar
  67. Lynn, D. 2011. The Dodd-Frank Act’s specialized corporate disclosure. Using the securities laws to address public policy issues. Journal of Business & Technology Law 6(2):327–355.Google Scholar
  68. Martin, P.R., and D.V. Moser. 2016. Managers’ green investment disclosures and investors’ reaction. Journal of Accounting and Economics 61:239–254.Google Scholar
  69. Miller, J.W., B.S. Fugate, and S.L. Golicic. 2017. How organizations respond to information disclosure. Testing alternative longitudinal performance trajectories. Academy of Management Journal 60(3):1016–1042.Google Scholar
  70. Mohan, B., T. Schlager, R. Deshpandé, and M.I. Norton. 2018. Consumers avoid buying from firms with higher CEO-to-worker pay ratios. Journal of Consumer Psychology 28(2):344–352.Google Scholar
  71. Overesch, M., and H. Wolff. 2017. Financial transparency to the rescue. Effects of country-by-country reporting in the EU banking sector on tax avoidance. Working Paper.Google Scholar
  72. Parker, D.P., J.D. Foltz, and D. Elsea. 2016. Unintended consequences of sanctions for human rights. Conflict minerals and infant mortality. Journal of Law & Economics 59(4):731–774.Google Scholar
  73. Pomering, A., and S. Dolnicar. 2009. Assessing the prerequisite of successful CSR implementation. Are consumers aware of CSR initiatives? Journal of Business Ethics 85:285–301.Google Scholar
  74. Ramanna, K. 2013. A framework for research on corporate accountability reporting. Accounting Horizons 27(2):409–432.Google Scholar
  75. Rauter, T. 2017. Disclosure regulation, corruption, and investment. Evidence from natural resource extraction. Working Paper..Google Scholar
  76. Riedl, A., and P. Smeets. 2017. Why do investors hold socially responsible mutual funds? The Journal of Finance 72(6):2505–2550.Google Scholar
  77. Sarfaty, G.A. 2013. Human rights meets securities regulation. Virginia Journal of International Law 54(1):97–126.Google Scholar
  78. Securities and Exchange Commission. 2012a. Conflict minerals. RIN 3235-AK84.Google Scholar
  79. Securities and Exchange Commission. 2012b. Disclosure of payments by resource extraction issuers. RIN 3235-AK85.Google Scholar
  80. Securities and Exchange Commission. 2013. What we do. Accessed 16 December 2018.Google Scholar
  81. Securities and Exchange Commission. 2014. The next 80 years. The 15th annual A.A. Sommer Jr. Lecture on corporate, securities and financial law. Accessed 16 December 2018.Google Scholar
  82. Securities and Exchange Commission. 2016. Disclosure of payments by resource extraction issuers. RIN 3235-AL53.Google Scholar
  83. Servaes, H., and A. Tamayo. 2013. The impact of corporate social responsibility on firm value. The role of customer awareness. Management Science 59(5):1045–1061.Google Scholar
  84. Steinmeier, M., and M. Stich. 2018. Does sustainability assurance improve managerial investment decisions? European Accounting Review Scholar
  85. Stigler, G.J. 1961. The economics of information. Journal of Political Economy 69(3):213–225.Google Scholar
  86. Weil, D., M. Graham, and A. Fung. 2013. Targeting transparency. Science 340(6139):1410–1411.Google Scholar
  87. Woody, K.E. 2012. Conflict minerals legislation. The SEC’s new role as diplomatic and humanitarian watchdog. Fordham Law Review 81(3):1315.Google Scholar

Copyright information

© Schmalenbach-Gesellschaft für Betriebswirtschaft e.V. 2018

Authors and Affiliations

  1. 1.Frankfurt School of Finance and ManagementFrankfurtGermany
  2. 2.Ludwig-Maximilians-University MunichMunichGermany

Personalised recommendations