Effects of frequent information disclosure: the case of daily net asset value reporting for closed-end investment companies

Gary McCormick () and Dan French ()

Review of Quantitative Finance and Accounting, 2016, vol. 46, issue 1, 107-122

Abstract: There are two competing hypotheses regarding the effects of increased financial disclosure. One states that increased disclosure leads to decreased information asymmetry and more efficient pricing resulting in reduced bid-ask spreads, volatility and illiquidity. The other says that increased disclosure places additional burdens on traders leading to increased transactions costs and volatility. This paper examines the effects of more-frequent reporting for the case of closed-end funds that voluntarily changed their net-asset-value reporting from weekly to daily beginning in 1998. Multivariate analyses indicate a decrease in asymmetric information following initiation of daily reporting as evidenced by lower spreads, greater transactions volume, reduced volatility and decreased illiquidity. We conclude that closed-end fund daily net-asset-value reporting provides an example of information disclosure that provides useful information to investors and reduces information asymmetry. Copyright Springer Science+Business Media New York 2016

Keywords: Closed-end funds; Disclosure; Information asymmetry; G14; G23 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s11156-014-0463-3

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