Responsive Enforcement Strategy and Corporate Compliance with Disclosure Regulations

We investigate the role of enforcement strategy in improving firms' compliance with corporate disclosure regulations. We find that a responsive enforcement strategy developed by the Australian corporate and financial markets regulator, the Australian Securities and Investments Commission (ASIC), yielded significant improvements in analysts' information environment and market liquidity over the period when a series of additional sanctions were progressively introduced. We conclude that the design and implementation of an appropriate enforcement strategy is an important determinant of the effectiveness of public enforcement of securities laws