Lecture: Certification and Disclosure
Title: Certification and DisclosureTime: 10:00-11:30, December 6, 2021
Room: Tencent meeting:547 271 347
Speaker: Pro. Xin Baohua
Abstract：We study the real effects of certification to shed light on the （incremental） value of mandatory certification over and above mandatory disclosure in enhancing investment efficiency. In our model, a firm manager selects a project to maximize the firm’s short-term stock price, which is a function of the manager’s certification and disclosure decisions regarding the outcome of the selected project. While the manager can be either forthcoming or strategic regarding the disclosure of her private information （Beyer and Dye, 2012; Bertomeu and Marinovic, 2016）, she can strategically choose whether to incur a cost to certify her disclosure, unless mandated. The manager always selects the first-best project when both certification and disclosure are mandatory. However, when certification is voluntary, project selection is generally inefficient. In addition, mandating disclosure without mandating certification can lead to lower investment efficiency than mandating neither. In justifying why mandatory certification is beneficial for public firms, our results challenge the contemplated regulatory move for more disclosures of public firms without corresponding certification requirements.