Can Securities Regulation Solve Social Problems? Evidence on the Real Effects of Mine Safety Disclosures under Dodd-Frank

We examine the effects of normative, policy-oriented disclosures aimed at addressing social issues introduced into securities regulation under the Dodd-Frank Act. One of these provisions requires SEC-registered firms to disclose mine-safety records in their financial reports. We study the impact of these disclosures on firm value, citations for safety-related violations of the Mine Act, and mining-related injuries. In short-window return tests around 8K disclosures of citations, we find that the disclosure of an imminent danger order is, on average, associated with a 39 basis point reduction in firm value. We also find that citations and injuries decrease by approximately 10 percent for mines operated by SEC-registered issuers, relative to those mines that are not. Consistent with the disclosure requirements creating incentives for improved safety, our results suggest that securities regulation can be an effective way to solve social problems.