Three Essays on Corporate Disclosures and Governance

Abstract

This thesis comprises three essays investigating the impact of corporate disclosures and governance practices on investor perceptions and behaviors. Chapter 2 validates that the Modernization
of Regulation S-K Item 105 enhances the conciseness of risk factor sections in 10-K filings and
prompts greater improvements in specificity and readability in lengthy risk disclosures compared
to concise ones. We find that modernized risk disclosures that are more firm-specific and lengthy
widen the information gap between insiders and outsiders. However, this effect is mitigated by
higher readability. Moreover, following modernization, increased risk disclosures mitigate the
profitability of insider purchases while enhancing insiders’ ability to avoid losses following their
sale transactions.
Chapter 3 investigates voting rationales to understand investors’ views on virtual shareholder
meetings (VSM). We find that institutional investors express dissatisfaction with VSM by voting
against directors of the governance committee, especially during periods when Glass Lewis
recommended voting against directors in firms hosting VSM. However, the results diminish
during Covid-19 when the meeting format was beyond directors’ control. Moreover, we observe
that firms are less likely to hold VSM in the future when there is high dissent for governance
committee members. Despite shareholder dissatisfaction with VSM, we observe no adverse effects
on directors’ participation at annual meetings.
Chapter 4 examines the determinants of proxy statement tone and how abnormal tone, which
captures tone management, relates to investor voting and trading. The findings suggest that firm
fundamentals, corporate governance, and shareholder activism are determinants of the tone of
proxy statements. I find that an abnormal positive tone correlates with increased support for
both management and shareholder proposals, with investors reacting more strongly to abnormal
negative disclosures within proxy statements compared to abnormal positive ones. Abnormal
trading volume is significantly higher around proxy filing dates when the statements convey a
higher abnormal positive tone.

Date of Award	1 Oct 2024
Original language	English
Awarding Institution	University of Bristol
Supervisor	Adriana K Korczak (Supervisor) & Silvina Rubio (Supervisor)