Financial Reporting Effects of the 1934 Securities Exchange Act

We document financial reporting effects of the 1934 Securities Exchange Act. Specifically, we find strong evidence that the act made the accounting of similar firms more similar. In contrast, we find no evidence that the act made the accounting of differing firms more similar. Together, these findings suggest that the act increased accounting comparability but not accounting uniformity. Further, the act increased information spillovers from earnings news released during bellwether firms’ earnings announcements to other firms within the same industry. We investigate possible mechanisms by which the act affected comparability and spillovers, and we identify the Securities and Exchange Commission’s financial reporting instructions and its financial reviews and comment letter process as the most likely drivers. Overall, our results provide evidence that the act improved financial reporting through increased accounting comparability and increased information spillovers, two features of accounting standards associated with numerous benefits for firms, investors, and capital markets. This paper was accepted by Suraj Srinivasan, accounting. Funding: The authors acknowledge financial support from European School of Management and Technology Berlin and The Ohio State University. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2024.06043 .