Compliance with Ongoing Financial Reporting Mandates: Field Experimental Evidence on the Decision to Issue an Annual Report

with Greg Burke
Working Paper
SSRN working paper available here. BibTeX citation available here. This paper previously circulated as ``Equity Crowdfunding `Rules’: Compliance with Mandated Ongoing Financial Reporting in an Unenforced Environment.”

Abstract: Using the Regulation Crowdfunding market, we examine why managers comply with ongoing financial reporting mandates. While incentives motivating compliance are often masked by high regulatory risk, in our setting enforcement is historically absent. We show that despite manager awareness of reporting obligations and investor demand for financial reports, over half of managers fail to file their annual report, with only a third filing timely. Using rich offering-level data, we find compliance is associated with external monitoring, potential economic benefits, and low compliance costs, though the predictive power of these factors is low. Exploiting a field experiment, we show that compliance increases by 20 percent in response to messages emphasizing the regulatory risk of non-compliance but find no detectable effect to messages emphasizing economic benefits. Our results provide insights into why managers comply with financial reporting mandates, informing the design of an effective, and potentially more efficient, regulatory regime.

I discussed this paper on the Business Scholarship Podcast.