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This paper investigates the effect of mandatory disclosure requirements for private firms on their decision to go public. Using detailed project‐level data for biopharmaceutical firms, we explore the effects of a legal reform that exogenously required firms to publicly disclose information regarding clinical trials. Exploiting cross‐sectional heterogeneity in firms' exposure to the regulation based on their internal development portfolios, we find that affected firms are significantly more likely to transition to public equity markets following the reform. Moreover, firms that go public because of the increased disclosure requirements subsequently reduce the size of their project portfolios while shifting to safer investments acquired externally. We provide additional evidence for the main hypothesis using a second setting: a 2006 German reform which enhanced the enforcement of mandatory disclosure requirements for private firms. The results suggest that private firms' general information environment and disclosure requirements influence the propensity of going public.

This study investigates a communication game between a CEO and a board of directors where the CEO's career concerns can potentially impede value‐increasing informative communication. By adopting a policy of aggressive boards (excessive replacement), shareholders can facilitate communication between the CEO and the board. The results are in contrast to the multitude of models which generally find that management‐friendly boards improve communication, and help to explain empirical results concerning CEO turnover. The results also provide the following novel predictions concerning variation in CEO turnover: (1) there is greater CEO turnover in firms or industries where CEO performance is relatively more difficult to assess; (2) the board is more aggressive in their replacement of the CEO in industries or firms where the board's advisory role is more salient; and (3) there is comparatively less CEO turnover in firms or industries where the variance of CEO talent is high.

This study provides evidence that the use of conservative accounting in debt contracting depends on the enforceability of the contract. To test the effect of debt contract enforcement on borrowers' timely loss recognition, we exploit the staggered introduction of enhanced debt contract enforcement in Indian states as a natural experiment, where the implementation of the enforcement is exogenous to the accounting choices and borrowing behavior of firms. The main results show that enhanced enforcement has a significant positive effect on the timeliness of loss recognition of borrowing firms. We find that the effect is strongest for firms that increased their overall borrowing and for firms with high levels of tangible assets, consistent with a collateral-based explanation. This study also provides causal evidence that firms adopt conservative accounting due to lenders' demand. JEL codes: G33; K12; M41