The effect of exogenous information on voluntary disclosure and market quality

Sivan Frenkel, Ilan Guttman and Ilan Kremer

Journal of Financial Economics, 2020, vol. 138, issue 1, 176-192

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.

Keywords: Information disclosure; Voluntary disclosure; Price efficiency; Liquidity; Analysts (search for similar items in EconPapers)
JEL-codes: D82 D83 G14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:138:y:2020:i:1:p:176-192

DOI: 10.1016/j.jfineco.2020.04.018

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