Corporate Governance and the Information Environment: Evidence from State Antitakeover Laws


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Abstract

In this paper we examine the relationship between corporate governance and firms’ information environments. We use the passage of state antitakeover laws in the U.S., which have been found to entrench management, as a source of an exogenous variation in corporate governance in order to identify changes in financial reporting attributes. We find an increase in financial statement informativeness and a decrease in information asymmetry following the adoption of state antitakeover laws. This evidence is consistent with managers improving their firms’ information environments in response to changes in corporate governance. Finally, our results suggest that information quality is a substitute for corporate governance mechanisms.
 
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Paolo Perego
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