Do information releases increase or decrease information asymmetry? New evidence from analyst forecast announcements

Amiram, Dan; Owens, Edward L.; Rozenbaum, Oded

doi:10.1016/j.jacceco.2016.06.001

Cited by 139 publications

(69 citation statements)

References 42 publications

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“…Our second set of validation tests examines the association between DQ and a widely accepted measure of information asymmetry: bid‐ask spreads. Specifically, we estimate a model based on finance theory (Demsetz [], Stoll []) that is empirically implemented in extant literature (Coller and Yohn [], Amiram, Owens, and Rosenbaum []). We estimate the following regression:

\begin{matrix} true \\ right {QBAS}_{i, t + 1} / {EBAS}_{i, t + 1} & = & left β_{1} + β_{2} {DQ}_{i, t} + β_{3} prefixlog {(italicVOL)}_{i, t} + β_{4} prefixlog {(italicPRICE)}_{i, t} \\ left + β_{5} {BTM}_{i, t} + β_{6} prefixlog {(italicAT)}_{i, t} + \sum {italicFundamentals}_{i, t} \\ left + \sum Ind_FE + \sum Yr_FE + u_{i, t} . \end{matrix}

…”

Section: Validation Testsmentioning

confidence: 99%

A New Measure of Disclosure Quality: The Level of Disaggregation of Accounting Data in Annual Reports

Chen

Miao

Shevlin

2015

J of Accounting Research

255

187

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We construct a new, parsimonious, measure of disclosure quality—disaggregation quality (DQ)—and offer validation tests. DQ captures the level of disaggregation of accounting data through a count of nonmissing Compustat line items, and reflects the extent of details in firms’ annual reports. Conceptually, DQ differs from existing disclosure measures in that it captures the “fineness” of data and is based on a comprehensive set of accounting line items in annual reports. Unlike existing measures, which are usually applicable for a subset of firms or are based on a subset of information items, DQ can be generated for the universe of Compustat industrial firms. We conduct three sets of validation tests by examining DQ's association with variables predicted by prior literature to be associated with information quality. DQ is negatively (positively) associated with analyst forecast dispersion (accuracy) and negatively associated with bid‐ask spreads and cost of equity. These associations continue to hold after we control for firm fundamentals. Taken together, results from this battery of validation tests are consistent with our measure capturing disclosure quality.

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\begin{matrix} true \\ right {QBAS}_{i, t + 1} / {EBAS}_{i, t + 1} & = & left β_{1} + β_{2} {DQ}_{i, t} + β_{3} prefixlog {(italicVOL)}_{i, t} + β_{4} prefixlog {(italicPRICE)}_{i, t} \\ left + β_{5} {BTM}_{i, t} + β_{6} prefixlog {(italicAT)}_{i, t} + \sum {italicFundamentals}_{i, t} \\ left + \sum Ind_FE + \sum Yr_FE + u_{i, t} . \end{matrix}

…”

Section: Validation Testsmentioning

confidence: 99%

A New Measure of Disclosure Quality: The Level of Disaggregation of Accounting Data in Annual Reports

Chen

Miao

Shevlin

2015

J of Accounting Research

255

187

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“…Column (1) shows that the bid‐ask spread significantly decreases after the Bribery Act passed. In Column (2), we follow prior literature (e.g., Amiram, Owens, & Rozenbaum, 2016; Daske, Hail, Leuz, & Verdi, 2008) by including additional control variables: market capitalization, return volatility, trading volume, and stock turnover; our results continue to hold. Columns (3) and (4) present consistent evidence when using Amihud's (2002) illiquidity measure.…”

Section: Potential Mechanismsmentioning

confidence: 69%

Do anti‐bribery laws reduce the cost of equity? Evidence from the UK Bribery Act 2010

Kim

Rees

Sila

2020

Business Fin & Account

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We examine the impact of the UK Bribery Act 2010 on the implied cost of equity. We find a significant reduction in the cost of equity amongst UK firms with high bribery exposure after the passage of the Bribery Act. We further show that the Bribery Act improves internal control systems and increases stock liquidity of firms with high bribery exposure. Our results suggest that more stringent antibribery regulations are not always bad for the firm. K E Y W O R D Santi-bribery law, bribery, cost of equity, information asymmetry, internal control, residual income valuation, stock liquidity

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“…We include several control variables to mitigate potential concerns regarding correlated omitted variables (e.g., Balakrishnan et al., ; Amiram, Owens, and Rozenbaum, ). We control for the proportion of fair value assets to total assets; Level 1 ( AL1TA ), Level 2 ( AL2TA ), and Level 3 ( AL3TA ), and the proportion of fair value liabilities to total assets; Level 1 ( L1TA ), Level 2 ( L2TA ), and Level 3 liabilities ( L3TA ) .…”

Section: Research Model and Resultsmentioning

confidence: 99%

Information Asymmetry and Voluntary SFAS 157 Fair Value Disclosures by Bank Holding Companies During the 2007 Financial Crisis

Weiss

Shon

2017

Accounting Perspectives

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We hand‐collect SFAS 157 voluntary fair value disclosures of 18 bank holding companies. The SEC's Division of Corporate Finance likely targeted these entities in 2008 through their “Dear CFO” letters in which they requested specific, additional disclosure items. We collect disclosures that match the SEC recommendations and create eight common factor disclosure variables to examine the effect of such disclosures on information asymmetry. We find that disclosure variables about the use of broker quotes or prices from pricing services and the use of market indices and illiquidity adjustments are related to lower information asymmetry. However, disclosure variables about valuation techniques and asset‐backed securities are related to greater information asymmetry. We also document that disclosure complexity, and disclosure tone (uncertainty and litigious) is related to greater information asymmetry. These findings are consistent with criticism that corporate disclosures are voluminous; management may obfuscate unfavorable information which in turn increases market participants’ assessment of uncertainty associated with the fair value measures. We caveat that the setting of the financial crisis and a small sample size may limit the ability to generalize these inferences to other time periods or other financial firms.

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Do information releases increase or decrease information asymmetry? New evidence from analyst forecast announcements

Cited by 139 publications

References 42 publications

A New Measure of Disclosure Quality: The Level of Disaggregation of Accounting Data in Annual Reports

A New Measure of Disclosure Quality: The Level of Disaggregation of Accounting Data in Annual Reports

Do anti‐bribery laws reduce the cost of equity? Evidence from the UK Bribery Act 2010

Information Asymmetry and Voluntary SFAS 157 Fair Value Disclosures by Bank Holding Companies During the 2007 Financial Crisis

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