Increasing Compliance with Ongoing Financial Reporting Mandates: Field Experimental Evidence

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, where enforcement is essentially absent, we examine whether alternative incentives can sustain compliance with an ongoing financial reporting mandate. Only 28 percent of issuers file their annual report on time and fewer than half ever file their first-year report, despite stating the deadline themselves in their offering statement. Using rich offering-level data, we find compliance is associated with external monitoring, potential economic benefits, and low disclosure costs, though these factors predict compliance poorly. Comparing incentives in a field experiment, we find that reminders emphasizing regulatory risk raise timely compliance by about 20 percent, while those emphasizing economic benefits or lower preparatory costs have no detectable effect, on average. Our results suggest that a low-cost reminder invoking regulatory risk can raise compliance even without enforcement, informing the design of a more cost-effective reporting regime.

I discussed this paper on the Business Scholarship Podcast.