The effectiveness of sanctions on disclosure regulation: Australian evidence

We investigate the deterrent effects of securities law enforcement sanctions with different levels of severity. Our setting is Australia's Continuous Disclosure Regulation, which features a range of sanctions from light through to more punitive. We find that after civil and administrative sanct...

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Published inAccounting and finance (Parkville) Vol. 63; no. 4; pp. 3841 - 3872
Main Authors Chen, Xiaomeng Charlene, Choi, Ka Wai, Wright, Sue, Wu, Hai
Format Journal Article
LanguageEnglish
Published Clayton Blackwell Publishing Ltd 01.12.2023
Subjects
deterrent effects
disclosure regulation
enforcement actions
market liquidity
responsive enforcement strategy
sanctions
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Summary:We investigate the deterrent effects of securities law enforcement sanctions with different levels of severity. Our setting is Australia's Continuous Disclosure Regulation, which features a range of sanctions from light through to more punitive. We find that after civil and administrative sanctions are imposed on a firm, market liquidity of industry‐peer firms significantly improves relative to non‐industry‐peers. Our results are robust to alternative measures, tests and models. The findings suggest that less costly and lighter sanctions are useful enforcement tools, providing important policy implications for securities regulators on the selection of sanctions to enforce disclosure regulation.
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ISSN:0810-5391
1467-629X
DOI:10.1111/acfi.13073