How important is equal access to mandatory disclosures? We exploit the postal strike of 1970 to answer this question. While the strike caused a delay in the delivery of annual reports via mail, it created unequal access because certain investors (e.g., institutions) had both the incentives and ability to obtain the annual reports by other means. Theory predicts that, when differential access exists, adverse selection problems intensify causing a decline in stock trading. Our findings support this prediction: stock trading volume decreased by approximately 28% for firms unable to deliver the annual reports to shareholders during the strike. Further tests confirm that adverse selection was the primary cause of the reduced trading volume. Overall, our paper underscores the importance of equal access to annual reports—a key mandated disclosure—and demonstrates the value of these reports to shareholders, as evidenced by their reluctance to trade in the absence of this information.
| Speaker: | Dr Mohan Venkatachalam RJ Reynolds Professor, Duke University |
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