We analyze a model in which information may be voluntarily disclosed by a firm and/or by a third party, e.g., financial analysts. Due to its strategic nature, corporate voluntary disclosure is qualitatively different from third-party disclosure. Greater analyst coverage crowds out (crowds in) corporate voluntary disclosure when analysts mostly discover information that is available (unavailable) to the firm. Nevertheless, greater analyst coverage always improves the overall quality of public information. We base this claim on two market quality measures: price efficiency, which is statistical in nature, and liquidity, which is derived in a trading stage that follows the disclosure stage.
Bibliographical noteFunding Information:
We thank an anonymous referee, Bill Schwert (the Editor), Yakov Amihud, and numerous participants in seminars and conferences for helpful discussions and suggestions. Frenkel and Kremer acknowledge financial support from the Israel Science Foundation (grant No. 547/18). Frenkel acknowledges financial support from the Henry Crown Institute of Business Research in Israel and the Jeremy Coller Foundation.
© 2020 Elsevier B.V.
- Information disclosure
- Price efficiency
- Voluntary disclosure