The effectiveness of sanctions on disclosure regulation: Australian evidence

We investigate the deterrent effects of securities law enforcement sanctions with different levels of severity. Our setting is Australia's Continuous Disclosure Regulation, which features a range of sanctions from light through to more punitive. We find that after civil and administrative sanctions are imposed on a firm, market liquidity of industry-peer firms significantly improves relative to non-industry-peers. Our results are robust to alternative measures, tests and models. The findings suggest that less costly and lighter sanctions are useful enforcement tools, providing important policy implications for securities regulators on the selection of sanctions to enforce disclosure regulation.