Information disclosure and price discovery

Ya Tang

Journal of Financial Markets, 2014, vol. 19, issue C, 39-61

Abstract: In this paper, I present a parsimonious, theoretical model to examine the influence of disclosure on market efficiency and on the cost of capital in the presence of endogenous information acquisition. Because disclosure “crowds out” private-information production, disclosure can either improve or harm market efficiency and the cost of capital, depending on whether investors׳ private-information production is sensitive to disclosure. This non-monotonic disclosure-cost-of-capital relation helps reconcile the existing mixed empirical evidence and has implications for the disclosure policies of firms.

Keywords: Disclosure; Information production; Market efficiency; Costs of capital (search for similar items in EconPapers)
JEL-codes: D61 G14 G30 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:19:y:2014:i:c:p:39-61

DOI: 10.1016/j.finmar.2014.03.002

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