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Does the large amount of information in corporate disclosures hinder or enhance price discovery in the capital market?

Dennis Y. Chung, Karel Hrazdil, Jiri Novak () and Nattavut Suwanyangyuan

Journal of Contemporary Accounting and Economics, 2019, vol. 15, issue 1, 36-52

Abstract: We analyze how the quantity of information in corporate disclosures affects the efficiency with which investors incorporate newly acquired information into stock prices. Specifically, we investigate both numerical and textual levels of detail provided in 10-K disclosures: (1) disaggregation (numerical) quantity (DQ) capturing the ‘fineness’ of accounting line items and (2) textual quantity (TQ) capturing the amount of ‘soft’ or narrative information. We find that both DQ and TQ are associated with an overall improvement in the efficiency of information price discovery. Our results provide empirical support for the benefits of detailed numerical and textual corporate disclosure.

Keywords: Disclosure quantity; Market efficiency; Price discovery (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2019
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Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi

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