Cálculo de Chi-cuadrado X 2 c

In this subsection, I investigate whether extraction payment disclosures impact market liquidity and stock returns once they are published. To this end, I manually collect the publication dates of PGD reports for a subsample of extractive companies that (i) prepared a payment disclosure for 2015 and (ii) are listed on the main market of the London Stock Exchange. Figure IA1 shows that roughly half of the reports were published during the last two days of June, which is due to the fact that the majority of UK extractive firms have their fiscal year end in December and that these companies need to provide their payment disclosures within 6 months of the end of each financial period. The publication dates of the remaining reports are evenly spread out over the year 2016. I merge this data

y_i,t =αi+αt+β·PGD[0,n]_i,t+γ0·Xi,t+i,t . (5)

The dependent variable is either the natural logarithm of the daily relative bid-ask spread or the firm’s daily stock return. PGD[0,n] is an indicator variable which equals one at the publication date of the extraction payment report and n trading days thereafter. In line with prior literature (Chordia et al.(2000);Christensen et al.(2013)), my vector of control variables X contains the natural logarithm of the firm’s market value, share turnover, and return variability, lagged by one trading week. αi conditions my analysis on time-invariant

firm characteristics and the trading day fixed effectαtcontrols for concurrent but unrelated

market-wide events, such as macroeconomic shocks. To account for dependence across observations, I use two-way clustered standard errors at the trading day and firm level.

In Table IA6, I document a decrease in equity bid-ask spreads up to one week following the publication of an extraction payment report. In the full sample, the coefficients are not statistically significant because the day fixed effects absorb most of the variation in PGD

due to the bunching of extraction payment reports at the end of June. Once I exclude the end of June disclosures, the negative estimates do become significant. The increase in liquidity by 11 to 18 percent is economically meaningful but not too large to be implausible. These results suggest that in the short run PGD reports reduce asymmetric information about extractive payment practices and political risk exposures between the firm and its shareholders or among (informed and uninformed) market participants.30 _{In contrast, the}

coefficient of PGD (indicator variable equal to one beginning at the publication date) indicates that extraction payment disclosures do not persistently reduce bid-ask spreads. Individually published, unaudited PGD reports might simply have too little scope to serve as credible disclosure commitment and thereby reduce information asymmetries in the long

30_{In untabulated results, I investigate several cross-sectional determinants of this relation and find that}

the decrease in information asymmetry is particularly strong for (complex) firms that are active in many host countries and operate multiple projects per country.

run (Diamond and Verrecchia(1991);Baiman and Verrecchia (1996); Leuz and Verrecchia (2000)).

In Table IA7, I investigate stock price reactions around the publication dates of extrac- tion payment disclosures. Prior literature documents negative abnormal returns for ex- tractive firms upon the announcement of PGD regulation (Hombach and Sellhorn (2017); Healy and Serafeim (2016); Johannesen and Larsen (2016)). In contrast, I do not find significant changes in stock returns once these companies actually publish their payment reports. My findings suggest that, on average, investors did not need to update their beliefs about future expected cash flows since they already correctly anticipated the implications of extraction payment disclosures at the announcement of the regulation.

7

Conclusion

Policymakers increasingly use disclosure regulation to mitigate illegitimate firm be- havior and address socio-political policy objectives by requiring firms to publicly provide information about corporate social responsibility. Despite its popularity as a policy tool, we know little about the consequences of CSR disclosures on firms’ behavior in the real economy. This paper examines the real effects of mandatory extraction payment disclo- sures, which require European oil, gas, and mining firms to publicly disclose their payments to foreign host governments in a granular report on their corporate website. I exploit plau- sibly exogenous variation in the adoption of extraction payment reports across European countries and firms’ fiscal year ends to disentangle the disclosure effects from concurrent but unrelated macroeconomic and regulatory changes.

Using manually-collected host country data on firms’ extractive activities abroad, I find that disclosing companies increase extractive payments but decrease investments relative

effects both within and across firms.

My results suggest that social responsibility disclosures can have sizeable real effects, especially if public shaming by specialized activist groups disciplines companies not to engage in illicit practices. In contrast, I do not find that extraction payment disclosures are associated with improved measures of corruption at the aggregate host country level, which casts doubt on recent unilateral efforts by Western countries to address foreign policy objectives by imposing disclosure regulation on only a subset of companies in the global marketplace.

The results of this paper should be interpreted with the following caveats in mind. First, my focus on extraction payment disclosures in the oil, gas, and mining industries may limit the external validity of my findings (Glaeser and Guay (2017)). While the extractive sector setting enables better identification along the causal path, the themes of CSR disclosures and public shaming apply more broadly to other accounting settings. Second, the coefficient differences in my cross-sectional tests are economically sizeable but many times not statistically significant. Therefore, readers should interpret these results with caution. In a future version of this paper, I will extend my post-period sample and isolate the shaming channel more comprehensively in additional cross-sectional tests that focus on the role of media competition and firms’ actual media coverage. Third, extraction payment disclosures may generate real effects through channels other than public sham- ing. For example, the detailed payment information in PGD reports may help European countries to enforce foreign bribery regulation more effectively. I leave the investigation of additional channels to future research.