How disclosure quality affects the level of information asymmetry

How disclosure quality affects the level of information asymmetry We examine two potential mechanisms through which disclosure quality is expected to reduce information asymmetry: (1) altering the trading incentives of informed and uninformed investors so that there is relatively less trading by privately informed investors, and (2) reducing the likelihood that investors discover and trade on private information. Our results indicate that the negative relation between disclosure quality and information asymmetry is primarily caused by the latter mechanism. While information asymmetry is negatively associated with the quality of the annual report and investor relations activities, it is positively associated with quarterly report disclosure quality. Additionally, we hypothesize and find that that the negative association between disclosure quality and information asymmetry is stronger in settings characterized by higher levels of firm-investor asymmetry. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

How disclosure quality affects the level of information asymmetry

Loading next page...
 
/lp/springer_journal/how-disclosure-quality-affects-the-level-of-information-asymmetry-DAjWxe9XXC
Publisher
Kluwer Academic Publishers-Plenum Publishers
Copyright
Copyright © 2007 by Springer Science+Business Media, LLC
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-007-9032-5
Publisher site
See Article on Publisher Site

Abstract

We examine two potential mechanisms through which disclosure quality is expected to reduce information asymmetry: (1) altering the trading incentives of informed and uninformed investors so that there is relatively less trading by privately informed investors, and (2) reducing the likelihood that investors discover and trade on private information. Our results indicate that the negative relation between disclosure quality and information asymmetry is primarily caused by the latter mechanism. While information asymmetry is negatively associated with the quality of the annual report and investor relations activities, it is positively associated with quarterly report disclosure quality. Additionally, we hypothesize and find that that the negative association between disclosure quality and information asymmetry is stronger in settings characterized by higher levels of firm-investor asymmetry.

Journal

Review of Accounting StudiesSpringer Journals

Published: Apr 4, 2007

References

  • Analyst coverage and intangible assets
    Barth, M. E.; Kasznik, R.; McNichols, M. F.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve Freelancer

DeepDyve Pro

Price
FREE
$49/month

$360/year
Save searches from Google Scholar, PubMed
Create lists to organize your research
Export lists, citations
Read DeepDyve articles
Abstract access only
Unlimited access to over
18 million full-text articles
Print
20 pages/month
PDF Discount
20% off