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Information disclosure and price discovery

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  • Tang, Ya

Abstract

In this paper, I present a parsimonious, theoretical model to examine the influence of disclosure on market efficiency and on the cost of capital in the presence of endogenous information acquisition. Because disclosure “crowds out” private-information production, disclosure can either improve or harm market efficiency and the cost of capital, depending on whether investors׳ private-information production is sensitive to disclosure. This non-monotonic disclosure-cost-of-capital relation helps reconcile the existing mixed empirical evidence and has implications for the disclosure policies of firms.

Suggested Citation

  • Tang, Ya, 2014. "Information disclosure and price discovery," Journal of Financial Markets, Elsevier, vol. 19(C), pages 39-61.
    • Handle: RePEc:eee:finmar:v:19:y:2014:i:c:p:39-61
    DOI: 10.1016/j.finmar.2014.03.002
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    Cited by:

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    3. Chu, Gang & Dowling, Michael & Shen, Dehua & Zhang, Yongjie, 2023. "Information demand density matters: Evidence from the post-earnings announcement drift," International Review of Financial Analysis, Elsevier, vol. 86(C).
    4. Xu, Weijun & Pan, Shiliang & Ji, Yucheng & Zhao, Qi, 2023. "Public disclosure with information sharing in financial market," Finance Research Letters, Elsevier, vol. 53(C).
    5. Evgeny Petrov, 2020. "Voluntary Disclosure and Informed Trading," Contemporary Accounting Research, John Wiley & Sons, vol. 37(4), pages 2257-2286, December.
    6. Keiichi Kubota & Hitoshi Takehara, 2016. "Information Asymmetry and Quarterly Disclosure Decisions by Firms: Evidence From the Tokyo Stock Exchange," International Review of Finance, International Review of Finance Ltd., vol. 16(1), pages 127-159, March.
    7. D.J. Johnstone, 2015. "Information and the Cost of Capital in a Mean-Variance Efficient Market," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(1-2), pages 79-100, January.

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    More about this item

    Keywords

    Disclosure; Information production; Market efficiency; Costs of capital;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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