ABSTRACT: (MANDATORY DISCLOSURE AND FINANCIAL DISTRESS: AN EXPLORATORY ANALYSIS OF INFORMATION REQUIRED TO ITALIAN BLACKLISTED COMPANIES). Market failures due to information asymmetries motivate the regulation of corporate disclosure. In particular, a concern justifying the action of regulators is adverse selection (Akerlof, 1970). The risk of adverse selection represents a significant threat for market’s participants in case of presence on the market of both companies with good perspectives and companies characterized by the going concern uncertainty. Especially in the latter case and on the market for listed companies, the primary purpose of disclosure’s requirements should be the reduction of adverse selection’s risk. This paper investigates whether, in case of listed companies characterized by going concern uncertainty, disclosure’s requirements imposed by the regulator are, at least potentially, adequate to overcome the risk of adverse selection. The research setting is the Italian ‘blacklist’, the list of companies under going concern uncertainty compelled to monthly diffuse requested information by the Italian Authority of Supervision (Consob). Firstly, this study aims at understanding if imposed requirements are potentially adequate to meet the market’s needs of specific information about companies’ perspectives. Secondly, it aims at understanding if the regulator adapts requirements in response to an increase of market opacity, due to exogenous factor such as macroeconomic shocks. To reach the research objectives, a review of all the 324 Authority’s documents issued from 2002 to 2015 is performed, looking for the specific requests of disclosure. Resulting sample consists of 89 specific requests. To analyse the requests, the paper exploits an adapted version of the model proposed by Beattie, Mc Innes and Fearnley (2004). This framework is applied to 295 unit of analysis (request units), whose contents have been classified using the thematic content analysis’ method (Krippendorff, 2004). Findings suggest that the regulator seems to underestimate the role of forward looking information and to require information similar to ordinary reports (backward looking, financial and quantitative information). Additionally, results highlight that, in consequence of 2008 crisis, there has been a change towards an improvement of the cost-opportunity ratio for companies but not also for users. Overall results cast doubts on the actual usefulness of the regulatory action in order to limit the adverse selection’s risk effectively.
KEYWORDS: mandatory disclosure, financial distress, Consob
