The effect of exogenous information on voluntary disclosure and market quality

Sivan Frenkel; Ilan Guttman; Ilan Kremer

doi:10.1016/j.jfineco.2020.04.018

The effect of exogenous information on voluntary disclosure and market quality

Sivan Frenkel^*, Ilan Guttman, Ilan Kremer

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

29 Scopus citations

Abstract

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.

Original language	English
Pages (from-to)	176-192
Number of pages	17
Journal	Journal of Financial Economics
Volume	138
Issue number	1
DOIs	https://doi.org/10.1016/j.jfineco.2020.04.018
State	Published - Oct 2020

Bibliographical note

Publisher Copyright:
© 2020 Elsevier B.V.

Keywords

Analysts
Information disclosure
Liquidity
Price efficiency
Voluntary disclosure

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10.1016/j.jfineco.2020.04.018

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abstract = "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.",

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KW - Liquidity

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The effect of exogenous information on voluntary disclosure and market quality

Abstract

Bibliographical note

Keywords

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