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In the series of papers, I attempt to investigate the economic consequences of disclosure regulations and I am interested in exploring the novel context of risk disclosure beyond traditional financial reporting, such as cybersecurity, flood risk, consumer protection, and global adoption of integrated reports and environmental, social and governance (ESG) executive compensation metrics. My first paper focuses on positive spillover effects of disclosure policy in the U.S. flood risk disclosure setting, my second paper focuses on negative unintended consequences of disclosure policy in the U.S. data breach disclosure setting, and my third paper investigates the interplay between external disclosure policy and internal incentives in the international integrated reporting setting. The first paper, titled “Aggregate Spillover Effects of Mandatory Transparency: Evidence from Flood Risk Disclosure in the U.S.”, is my single-authored job market paper. I examine whether staggered mandatory transparency in flood risk has aggregate spillover effects on the mortgage industry. I respond to the call for research on the market- wide or aggregate effects of disclosure regulation and provide initial evidence for welfare analysis of mandatory transparency policy. I predict, and find, that by providing more credible and complete information about the value of housing collateral, mandatory flood risk disclosure reduces the uncertainty of credit risk and, on average, increases mortgage lending. I also find that these positive spillover effects only arise for properties with low flood risk, and are significantly greater relative to those with high flood risk ex ante. This highlights that creditors respond to mandatory transparency policy by introducing more lending to the industry as a whole. The second paper, titled “Mandatory Data Breach Transparency and Insider Trading”, is a joint work with Gilles Hilary and Xiaoli (Shaolee) Tian. We study the unintended consequences of staggered mandated data breach notification laws on insider-selling behaviors. We find that trading profits are greater after states require firms to disclose breaches. The effect is concentrated among firms located in states that implement weaker versions of the law. Unless financially constrained, firms located in states that implement stricter versions increase their cyber-related investment. In contrast, the weaker laws lead to an increase in idiosyncratic crashes. These crashes as well as the lack of cyber-related investments are linked to the profitability of insider sales. These findings indicate that mandatory data breach disclosures reveal adverse events that may not have surfaced otherwise and increase managers’ incentives to sell their shares to avoid future losses. Thus mandatory transparency policies may have unintended consequences and they must be carefully designed to avoid negative externalities. The third paper, titled “When one just is not enough: The joint effect of Integrated Reporting and ESG incentives on firm value”, is a joint work with Ariela Caglio and Gaia Melloni. We study the economic benefits deriving from combining corporate Environmental, Social and Governance (ESG) disclosure with ESG incentives. Drawing on complementarity theory, we argue that the combined adoption of both ESG disclosure and ESG incentives helps firms to avoid their merely symbolic use and leads to performance benefits. Our results show that the combination of Integrated Reporting (IR) with ESG incentives improves firms’ value measured as ex post realized operating cash flows in the short, medium and long term. We also suggest that the specific characteristics of ESG incentives (time orientation, completeness and specificity) matter. Therefore, not only the presence of such incentives, but also how firms design them is relevant to achieve the value creation benefits stemming from coupling ESG incentives with ESG disclosure.

Essays on Disclosure Regulations



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Settore SECS-P/07 - Economia Aziendale
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Descrizione: XiChen_PhD Thesis_revised
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