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Measuring Public Announcements’ Disclosure Quality on Tallinn, Riga and Vilnius Stock Exchanges

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  • Laivi Laidroo

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    (Department of Economics at Tallinn University of Technology)

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    Abstract

    Previous literature has been occupied with measuring disclosure quality in financial reports and no indication has been provided on how the quality of public announcements could be measured. The purpose of this paper is to introduce a methodological approach to its measurement and to illustrate its implementation possibilities in the context of Tallinn, Riga and Vilnius Stock Exchanges. The disclosure quality measure proposed was based on six quality attributes (informativeness, relevance, precision, rarity, frequency, and unexpectedness) defined in the context of information theory and operationalised through finance/accounting and cognitive psychology theories. Implementation in the context of three capital markets confirmed that there has been an increase in disclosure quality over time. Company size and stock exchange where the company was listed affected its disclosure quality level. Main areas for disclosure quality improvement were identified and the results also indicated that small firms and companies with low quality disclosures tended to be less prone to disclosure quality improvement.

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    Bibliographic Info

    Paper provided by Tallinn School of Economics and Business Administration, Tallinn University of Technology in its series Working Papers with number 181.

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    Length: 23
    Date of creation: 2008
    Date of revision:
    Publication status: Published in Working Papers in Economics.School of Economics and Business Administration,Tallinn University of Technology (TUTWPE), Pages 5-27
    Handle: RePEc:ttu:wpaper:181

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    Keywords: Disclosure; public announcements; emerging markets;

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    References

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    1. Vega, Clara, 2006. "Stock price reaction to public and private information," Journal of Financial Economics, Elsevier, vol. 82(1), pages 103-133, October.
    2. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
    3. Nielsen, Christian, 2004. "Through the eyes of analysts: a content analysis of analyst report narratives," Management Accounting Research Group Working Papers M-2004-03, University of Aarhus, Aarhus School of Business, Department of Business Studies.
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    5. Paul Ryan & Richard J. Taffler, 2004. "Are Economically Significant Stock Returns and Trading Volumes Driven by Firm-specific News Releases?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(1-2), pages 49-82.
    6. Ho, Thomas S. Y. & Michaely, Roni, 1988. "Information Quality and Market Efficiency," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(01), pages 53-70, March.
    7. Chan, Wesley S., 2003. "Stock price reaction to news and no-news: drift and reversal after headlines," Journal of Financial Economics, Elsevier, vol. 70(2), pages 223-260, November.
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