Three Essays on Voluntary and Mandatory Firm Disclosures

  • Efstratios-Dimitrios Christoforakis

Student thesis: Phd


This thesis empirically examines firm disclosures. The first essay examines voluntary disclosures while the other two essays examine mandatory disclosures. The first essay re-examines the relation between disclosure volume in the Chairman's Statement and firm performance, and, in doing so, makes two innovations. First, it employs a novel and large-scale dataset of automated disclosure scores to test the relation between disclosure and performance for a much larger sample than has previously been the case. Second, it complements the initial test on the relation between disclosure and performance in the Chairman's Statement by conducting two further tests between (i) performance and tone, and (ii) performance and causal language, both designed to examine whether changes in disclosure volume are likely to be motivated by a desire to obfuscate, or, alternatively, a desire to inform. Consistent with prior literature the empirical findings suggest that there is a negative relation between firm performance and the length of the Chairman Statement. However, further analysis of other textual characteristics, such as the tone, causal language, and readability, suggests that firms aim to inform investors, not to obfuscate. The aim of the second essay is to investigate the impact of two key UK regulatory initiatives on the dissemination of corporate information flows. One regulatory initiative is the Guidance on Price-Sensitive Information (PSI) - implemented in 1994 - and the other initiative is the Market Abuse Directive - implemented in the UK in 2005. Both initiatives aimed at minimizing market abuse and insider trading by requiring firms to disclose price-sensitive information promptly and/or by enforcing PSI rules more strictly. In order to measure news flows, both good and bad, the study calculates the number of days over which one unit of positive (negative) abnormal stock return spreads, with higher spreads being consistent with the prompt disclosure on arrival. The analysis suggests that both regulatory initiatives - PSI and MAD - improved the dissemination of information flows. This is an important finding as it suggests that both (i) rule change and (ii) stricter enforcement are likely to contribute to improved corporate news flows. The third essay starts by observing that the ongoing strengthening of market abuse rules by the European Union (EU) suggests that security regulators continue to be concerned about market abuse in the form of insider trading. A typical regulatory response to concerns about insider trading is to mandate and enforce disclosure rules that require firms to disseminate price-relevant information to capital markets promptly. The aim of the essay is to assess the effectiveness of the Market Abuse Directive (MAD) in forcing listed firms on EU capital markets to improve their information flows, that is, to disclose price-sensitive information promptly. For that, the essay calculates again the number of days over which one unit of positive (negative) abnormal stock return spreads. This essay finds that the MAD indeed improved the disclosure of company news flows among EU listed companies but that the treatment effect was not homogeneous. Specifically, this essay finds that the treatment effect was more prominent in countries where the disclosure rules had been implemented more strictly.
Date of Award1 Aug 2020
Original languageEnglish
Awarding Institution
  • The University of Manchester
SupervisorChristopher Humphrey (Supervisor) & Thomas Schleicher (Supervisor)


  • news flows
  • European Directives
  • market abuse directive
  • market abuse
  • financial performance
  • negative keywords
  • positive keywords
  • causal language

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