Disclosure Deregulation of Quarterly Reporting

In this article we investigate the deregulation efforts resulting from the 2015 transposition of the EU’s Transparency Directive into German law and analyze whether a reduction in the minimum content requirements for quarterly reporting increases information asymmetries and decreases firm value. Using a novel dataset of firms listed on the Frankfurt Stock Exchange we manually examine firms’ quarterly reports for their content elements and construct a new quarterly reporting measure with an ordinal quality dimension. The results reveal that during the period from 2012 to 2019 lower quarterly reporting levels due to the deregulation on average increase information asymmetry and reduce firm value. We find that this effect is stronger for first-tier stocks and firms with high media coverage which makes quarterly reporting more important for these firms. The results are robust to potential selection effects regarding firms’ choice of quarterly reporting content levels.