Firm's information environment and stock liquidity: evidence from Tunisian context

Purpose - The purpose of this paper is to analyze the impact of public and private information of Tunisian firms on stock liquidity. Design/methodology/approach - The paper uses a sample of 41 Tunisian firms listed in Tunis Stock Exchange for the year 2007. Public information disclosed in annual reports and in web sites is measured by two self‐constructed disclosure indexes. To assess private information the authors use imbalance order flows. The stock liquidity proxy used in the study is Liu's multidimensional measure. Ordinary least squares (OLS) regression is applied to model the relationship between firm's information environment and stock liquidity. Findings - First, the results provide evidence that public and private information are independent. Second, Tunisian investors do not trust the information disclosed in both annual reports and web sites, consequently it has no effect on stock liquidity, in contrast with private information. This result implies that Tunisian investors are overconfident and rely only on their private information. Practical implications - The paper's findings indicate that Tunisian regulation efforts to enhance corporate transparency are not sufficient. Hence, Tunisian firms need more incentives to disclose more information to investors. Originality/value - This paper, to the authors’ best knowledge, is the first to investigate the effect of both private and public information on stock liquidity. Moreover, the authors were not limited to annual reports as the only source of public information, as were prior papers, because public information was assessed in both annual reports and corporate web sites.