Financial Disclosure Regulation to Achieve Public Policy Objectives: Evidence from Extractive Issuers

This study examines investors’ perceptions of the SEC’s ‘ex-traction payments disclosure rule’. Intended to empower advocacy groups to hold governments and firms accountable, the rule requires extractive issuers to disclose by project their payments to governments. Stock price reactions around regulatory events suggest that investors, on average, ex-pect net costs from a strict implementation of the rule. In the cross-section, abnormal returns around these events are negatively associated with firms’ vulnerability to advocacy group campaigns. Our archival and interview-based findings support the notion that financial disclosures can provide useful information to advocacy groups and lead to a redistribution of wealth, consistent with a public policy objective.