Deterrence effects of expanding sanctions of discolsure regulation: evidence from analysts' information environment

Disclosure regulations largely depend on deterrence. Recent years have seen many expansions in corporate disclosure regulations in developed markets. Many involved adding/expanding sanctions. While theories such as economics of crime and strategic regulation support that expanding sanctions generates additional deterrence, the effects may be undermined by the fact that budget-constrained regulators generally can only afford low detection and enforcement activities. Furthermore, firms incur costs complying with these laws. This paper examines empirically whether adding sanctions generates incremental deterrence effects.