Accounting for Human Rights Violations Risk: Conflict Minerals Mandatory Disclosures under the Dodd Frank Act

This paper examines the equity market response to firms’ disclosure of human rights violation risk with regard to conflict mineral usage as required by Section 1502 of the Dodd-Frank Act (the Act). This paper assesses the aggregate equity market response to regulatory events leading to the passage of the Act, the equity market reaction to voluntary early disclosures and mandatory disclosures of conflict mineral information in Form SD, as well as the determinants of the equity market response. Using a sample of 4,399 US registrants from January 1, 2008 to September 30, 2014, we document a significant negative stock market reaction to the passage of the Act and to conflict minerals disclosures on Form SD. The equity market reaction is more negative and limited to companies that source their minerals from conflict zones, companies with human rights violations, and companies with ambiguous disclosures. Taken together, the results of this study provide an economic justification for companies with poor conflict minerals practices to improve in order to avoid high costs that will arise if firms are forced to disclose human rights abuses. This paper also provides preliminary evidence that Form SD is successful in reducing the governance gap that exposes investors to unnecessary sanction, litigation and reputation risk from firms’ activities in conflict minerals usage.

Indenture - Land sold by Hart Smith of Lincoln County to James Fields of Newark in Oxford County

Indenture regarding land sold by Hart Smith of Lincoln County to James Fields of Newark in Oxford County, First Concession, Lot no. 3. October 11, 1797.

Indenture between Enoch Durham and Joseph Smith

Indenture between Enoch Durham of Stamford Township and Joseph Smith of Stamford Township regarding a lease in Lot 130 in Stamford Township. April 1, 1842.

Letter to S.D. Woodruff from A.C. Leslie and Co., of Montreal

Letter to S.D. Woodruff from A.C. Leslie and Co., of Montreal saying that the glass that he wants is not usually kept in stock, June 5, 1875.

Printed blank from Frank Pearce and Co. Shipping and Insurance Agents

Printed blank from Frank Pearce and Co. Shipping and Insurance Agents regarding the bill of landing for the porcelain cask, Oct. 26, 1876.

Printed blank from Frank Pearce and Co. regarding charges for shipping of the porcelain cask

Printed blank from Frank Pearce and Co. regarding charges for shipping of the porcelain cask, Oct. 26, 1876.

Indenture of deed for taxes between Benjamin Walker Smith, sheriff of the County of Simcoe and Joseph A. Woodruff of the Town of Clifton

Indenture of deed for taxes between Benjamin Walker Smith, sheriff of the County of Simcoe and Joseph A. Woodruff of the Town of Clifton for 98 acres in the Township of Tiny in the County of Simcoe, Lot no. 15 in the 18th Concession, Dec. 12, 1861.

Receipt from Rolph Smith Lithographers by Steam Power and Co. of Toronto

Receipt from Rolph Smith Lithographers by Steam Power and Co. of Toronto for a name plate, Aug. 23, 1886.

Indenture of bargain and sale (vellum) between David William Smith of Alnwick, Great Britain and William Dickson of Niagara

Indenture of bargain and sale (vellum) between David William Smith of Alnwick, Great Britain and William Dickson of Niagara for 90 acres in the Township of Niagara –instrument no. 5926. Attached to this is a notice of Power of Attorney dated Apr. 6, 1810, which states that David William Smith of Alnwick, Great Britain allows James Crooks of Niagara to be his lawful attorney. The power of attorney is slightly torn. This does not affect the text, Sept. 21, 1810.

Questions and answers of W. Joseph Smith, clerk of Grimsby

Questions and answers of W. Joseph Smith, clerk of Grimsby (2 pages, handwritten). These pages are stained and slightly torn. This affects a small portion of the text, 1830.

Examination of W. Joseph Smith, clerk of Grimsby

Examination of W. Joseph Smith, clerk of Grimsby (2 pages, handwritten). The pages are stained and torn. This affects the text slightly, 1830.

Marriage Bond between Henry Chambers of Ancaster and Sarah Smith of Ancaster

Marriage Bond between Henry Chambers of Ancaster and Sarah Smith of Ancaster signed by Charles Anderson of Grimsby and Robert F. Nelles of Grimsby, Dec. 27, 1836.

Marriage Bond between John Smith of Glanford in the Gore district and Jane Atkins of Ancaster

Marriage Bond between John Smith of Glanford in the Gore district and Jane Atkins of Ancaster signed by Edmund Smith of Ancaster and Jeremiah Smith of Glanford, Jan. 17, 1837.

Letter to Mr. Bradley from Cornelius Smith of Smith and Wilkins

Letter to Mr. Bradley from Cornelius Smith of Smith and Wilkins regarding money owed by Mickel Cumrfoord [Michael Cumerford] (1 ½ pages, handwritten), Sept. 28, 1838.