The Effect of Voluntary Governance Rating Disclosures on SEOs and Acquisitions

Voluntary disclosures play an increasingly larger role in the corporate world, yet their implications remain controversial. On the one hand, voluntary disclosures create value by decreasing information asymmetry between managers and investors. On the other hand, they may be used opportunistically by the managers in capital market transactions and corporate development activities. We contribute to this debate by examining the effect of firms' voluntary disclosures of corporate governance ratings on the timing and performance of seasoned equity offerings (SEOs) and acquisitions. We conduct our analyses within the context of Turkey, one of the countries in which corporate governance scores are obtained on a voluntary basis. We find that firms which voluntarily disclose their governance ratings are less likely to undertake both SEOs and acquisitions which are commonly associated with managerial opportunism. Furthermore, these firms experience higher abnormal stock returns from the announcement of SEOs and acquisitions suggesting that voluntary disclosures of governance ratings provide credible signals to investors