The effect of exogenous information on voluntary disclosure and market quality

Sivan Frenkel, Ilan Guttman, Ilan Kremer

Research output: Contribution to journalArticlepeer-review

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 languageEnglish
Pages (from-to)176-192
Number of pages17
JournalJournal of Financial Economics
Volume138
Issue number1
DOIs
StatePublished - Oct 2020

Keywords

  • Analysts
  • Information disclosure
  • Liquidity
  • Price efficiency
  • Voluntary disclosure

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