IDEAS home Printed from https://ideas.repec.org/a/eme/ijmfpp/v4y2008i1p60-75.html
   My bibliography  Save this article

Stock market liquidity and information asymmetry around voluntary earnings disclosures: New evidence from France

Author

Listed:
  • Faten Lakhal

Abstract

Purpose - The purpose of this paper is to examine whether non-mandated earnings disclosures include value-relevant information and affect information asymmetry and stock market liquidity. Design/methodology/approach - The event study methodology explores the informational content of good, bad and neutral voluntary earnings disclosures. The OLS panel regression framework is, then, used to analyze information asymmetry and stock market liquidity subsequent to both categories of voluntary earnings disclosures (i.e. earnings forecasts and quarterly earnings disclosures). Findings - Empirical tests show that voluntary earnings disclosures include material information and that bad news is released in an untimely fashion leading to information leakage in the pre-announcement period. The results also indicate that quarterly earnings enhance stock market liquidity by shrinking bid-ask spreads. However, earnings forecasts exacerbate information asymmetry before and after the announcement date. This result confirms the existence of information leakage and suggests that managers have considerable discretion whether to make a forecast, and in deciding its timing, form, and specificity. Research limitations/implications - This paper examines stock market liquidity around voluntary earnings disclosures using effective spreads. Future research should examine other proxies for market liquidity, i.e. market depth. Practical implications - The results provide insights on the positive benefits of a disclosure policy. Companies have to provide investors with better and timely information in order to mitigate the information leakage risk and thus improve stock market liquidity. Originality/value - This paper provides new evidence about information content, information asymmetry and stock market liquidity around voluntary earnings disclosures in France. Unlike financial statements disclosures, quarterly earnings and earnings forecasts are isolated events that can be evaluated by the market with less noise.

Suggested Citation

  • Faten Lakhal, 2008. "Stock market liquidity and information asymmetry around voluntary earnings disclosures: New evidence from France," International Journal of Managerial Finance, Emerald Group Publishing, vol. 4(1), pages 60-75, January.
  • Handle: RePEc:eme:ijmfpp:v:4:y:2008:i:1:p:60-75
    as

    Download full text from publisher

    File URL: http://www.emeraldinsight.com/10.1108/17439130810837384?utm_campaign=RePEc&WT.mc_id=RePEc
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:spr:jmgtco:v:28:y:2017:i:3:d:10.1007_s00187-017-0251-z is not listed on IDEAS
    2. Gelman, Sergey & Lushchikov, Roman, 2015. "Stock liquidity in forefront of anticipated announcements," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113176, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Stock markets; Earnings; France;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:ijmfpp:v:4:y:2008:i:1:p:60-75. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: http://www.emeraldinsight.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.