Implicit Communication and Enforcement of Corporate Disclosure Regulation

This study examines the challenge of implicit communication -- qualitative statements, tone, and non-verbal cues -- to the effectiveness of enforcing corporate disclosure regulation. We use a Regulation Fair Disclosure (Reg FD) setting, given that the SEC adopted the regulation recognizing that managers can convey non-public information privately not just through explicit quantitative disclosures but also through implicit communication. In a high-profile enforcement action, however, the court focused on a literal examination of the manager’s language rather than his positive spin to conclude that the SEC had been “too demanding” in examining the manager’s statements and that its enforcement policy was “overly aggressive.” We provide empirical evidence suggesting that selective disclosure from managers to financial analysts increased significantly after the court’s ruling. We also report survey responses from 60 securities lawyers with Reg FD expertise which support the proposition that this increase in disclosure is more likely due to an increase in implicit communication than in explicit communication or any other reason. Our results highlight the challenges associated with enforcing corporate disclosure regulation in the context of implicit communication

Managers’ Private Communications with Analysts: The Effect of SEC v. Siebel Systems Inc.

In 2005, the SEC suffered a high-profile loss in its first court case, SEC v. Siebel Systems Inc., in effort to enforce Regulation Fair Disclosure (Reg FD). We examine the impact of this loss on managers’ selective disclosure to sell-side analysts. Using a variety of tests, we provide evidence that the information content of analyst reports increased after the Siebel decision, especially for observable instances of private meetings. This finding suggests that such selective disclosure increased significantly after the court’s decision. Our results also suggest that the increased selective disclosure faded as the SEC resumed enforcement actions related to Reg FD in 2009. In exploratory analyses, we survey and interview law firm partners to investigate possible mechanisms for our results; their responses suggest that the Siebel outcome reduced manager concern about liability from selective disclosure. Collectively, our results highlight how the anticipated costs of regulatory enforcement affect private information flow from managers to analysts in particular

Managers’ Private Communications with Analysts: The Effect of SEC v. Siebel Systems Inc.

In 2005, the SEC suffered a high-profile loss in its first court case, SEC v. Siebel Systems Inc., in effort to enforce Regulation Fair Disclosure (Reg FD). We examine the impact of this loss on managers’ selective disclosure to sell-side analysts. Using a variety of tests, we provide evidence that the information content of analyst reports increased after the Siebel decision, especially for observable instances of private meetings. This finding suggests that such selective disclosure increased significantly after the court’s decision. Our results also suggest that the increased selective disclosure faded as the SEC resumed enforcement actions related to Reg FD in 2009. In exploratory analyses, we survey and interview law firm partners to investigate possible mechanisms for our results; their responses suggest that the Siebel outcome reduced manager concern about liability from selective disclosure. Collectively, our results highlight how the anticipated costs of regulatory enforcement affect private information flow from managers to analysts in particular

Implicit Communication and Enforcement of Corporate Disclosure Regulation

This study examines the challenge of implicit communication -- qualitative statements, tone, and non-verbal cues -- to the effectiveness of enforcing corporate disclosure regulation. We use a Regulation Fair Disclosure (Reg FD) setting, given that the SEC adopted the regulation recognizing that managers can convey non-public information privately not just through explicit quantitative disclosures but also through implicit communication. In a high-profile enforcement action, however, the court focused on a literal examination of the manager’s language rather than his positive spin to conclude that the SEC had been “too demanding” in examining the manager’s statements and that its enforcement policy was “overly aggressive.” We provide empirical evidence suggesting that selective disclosure from managers to financial analysts increased significantly after the court’s ruling. We also report survey responses from 60 securities lawyers with Reg FD expertise which support the proposition that this increase in disclosure is more likely due to an increase in implicit communication than in explicit communication or any other reason. Our results highlight the challenges associated with enforcing corporate disclosure regulation in the context of implicit communication

THE EFFECT OF AUDIENCE SIZE ON MANAGERS' PRIVATE DISCLOSURES

I use experimental and survey evidence to investigate how and why audience size affects managers’ disclosure content in private meetings with investors. The experiment uses a 2x2 between-subjects design with 328 experienced managers. I predict and find that larger audiences decrease bad news disclosure because of increases in managers’ self-focus. I provide evidence of self-focus as the causal mechanism using both experimental manipulation and measurement. The survey elicits responses from 114 investor relations officers on actual private disclosure experiences and provides (a) support for my experimental assumption about the variability of audience size in practice and (b) evidence consistent with the experiment suggesting managers are unaware of the effect of audience size. I contribute by (1) providing evidence on the determinants of content in managers’ private disclosures, (2) demonstrating the effects of managers’ self-focus as a previously unexamined determinant of voluntary disclosure, and (3) providing additional descriptive evidence on managers’ private disclosures. My results may also provide increased understanding of the differences between private and public disclosures

Potential evidence of fossilised Neoproterozoic deep life: SEM observations on calcite veins from Oppaminda Creek, Arkaroola, South Australia

Scanning electron microscopy revealed micronsized globular and coccoid objects, associated with filaments and mucus-like patches in antitaxial fibrous calcite veins from Oppaminda Creek, Northern Flinders Ranges, South Australia. Chemically the objects only differ from their calcite (CaCO3) matrix by a higher sulphur content. The similar to 585 Ma veins formed at about 3-6 km below the surface. Fluid inclusions indicate a temperature of formation of about 60-80 degrees C, and not exceeding 100 degrees C. A nonbiogenic origin of the objects is discussed, but considered unlikely. Instead, morphology, chemistry and size distribution all indicate that the objects are fossilised microbes that lived in the veins at the time and depth of vein formation