Empirical Evidence on the Role of Trading Suspensions in Disseminating New Information to the Capital Market
AbstractThis paper examines the effect of temporarily suspending the trading of exchange-listed individual stocks. We evaluate whether regulatory authorities can successfully use the mechanism of trading suspension in forcing companies to disclose new and material information to the capital market. Previous studies on trading suspensions mainly concentrate on North-American stock markets and find conflicting results. This study utilizes a new data set comprising of firms listed on Euronext Brussels - an important segment of Europe's leading cross-border exchange. Our results show that suspension is indeed an effective means of disseminating new information. Stock prices adjust completely and instantaneously to the new information released during trading suspensions. We also observe a significant increase in trading volume with the reinstatement of trading. On the other hand, we do not find support for the claim that trading suspensions increase the volatility of stock prices. Overall, our results show the efficacy of trading suspensions in disseminating new information. Copyright 2006 The Authors Journal compilation (c) 2006 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Business Finance & Accounting.
Volume (Year): 33 (2006-09)
Issue (Month): 7-8 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X
Other versions of this item:
- Engelen, P.J. & Kabir, M.R., 2001. "Empirical Evidence on the Role of Trading Suspensions in Disseminating New Information to the Capital Market," Discussion Paper 2001-92, Tilburg University, Center for Economic Research.
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
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