How does corporate voluntary disclosure affect asymmetric information and adverse selection?

Amal Hamrouni, Anthony Miloudi () and Ramzi Benkraiem
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Amal Hamrouni: GEREM - Groupe d 'Etudes et de Recherche en Economie et Management - UPVD - Université de Perpignan Via Domitia - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper investigates whether the extent of corporate voluntary disclosure mitigates asymmetric information and adverse selection in the Euronext Paris stock exchange. We apply a disclosure index as a proxy for the extent of voluntary disclosure and use different spread measures to estimate both asymmetric information and adverse selection. Our findings show a negative relationship between the disclosure index and asymmetric information and adverse selection proxies. An analysis of sub-indexes provides additional mixed results. Several asymmetric information measures are negatively related to the volume of financial, non-financial and voluntary governance information in corporate annual reports. Nevertheless, the effect of strategic information volume is statistically significant only for effective bid-ask spreads. On the whole, these results are consistent with the view that high corporate voluntary disclosure is associated with narrow spreads and low adverse selection costs.

Keywords: France; adverse selection; annual reports; asymmetric information; Corporate voluntary disclosure (search for similar items in EconPapers)
Date: 2015
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Published in Corporate Ownership & Control, 2015, 12 (2), pp.419-431

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01134212

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