The Real Effects of Mandatory Non-Financial Disclosures in Financial Statements

We examine the real effects of mandatory, non-financial disclosures, introduced into securities regulation under the Dodd-Frank Act, which require firms to disclose their mine-safety records in their financial reports. Most, if not all, of the information included in these disclosures was already publicly available, which allows us to examine the incremental effects of including the information in financial reports. Comparing mines owned by SEC-registered issuers to those mines that are not, we document that the disclosures are associated with an approximately 11 percent decrease in both mining-related citations and injuries. We also find suggestive evidence that productivity declines. Using short-window return tests around disclosures of citations, we show that markets price mine-safety information and that financial statement disclosure appears to incrementally increase investors’ awareness of safety issues. Overall, our results suggest that there are real effects of disclosing non-financial information in financial statements—even if this information is publicly available elsewhere.