Author : Hui Tong
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Book Synopsis Disclosure Standards and Market Efficiency by : Hui Tong
Download or read book Disclosure Standards and Market Efficiency written by Hui Tong and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the Mexican and Asian crises, there has been a proliferation of international initiatives, including an ambitious standard-setting agenda, to encourage banks, firms and governments to disclose more information about their financial affairs. This paper studies whether and how such transparency standards affect information accuracy and dispersion. I show that the impact of transparency initiatives may be more limited than often thought to the extent that public disclosure crowds out private investments in information. I first develop a theoretical model of the incentive to invest in information and the impact of public disclosure. I then analyze a panel data set of stock market analysts' forecasts for sixty countries for the period 1990-2002. I find that disclosure standards enhance forecast accuracy directly but at the same time reduce the number of analysts per stock (the variable that serves as my proxy for private investments in information). The net effect of disclosure standards on forecast accuracy and dispersion thus ranges from weak to nonexistent. The implication is that studies that fail to analyze this crowding out effect may exaggerate the impact of disclosure standards on market outcomes.