Abstract

http://ssrn.com/abstract=1950123
 
 

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Shaping Liquidity: On the Causal Effects of Voluntary Disclosure


Karthik Balakrishnan


London Business School

Mary Brooke Billings


New York University

Bryan T. Kelly


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Alexander Ljungqvist


New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

August 25, 2013

Journal of Finance, Forthcoming

Abstract:     
Can managers influence the liquidity of their firms’ shares? We use plausibly exogenous variation in the supply of public information to show that firms actively shape their information environments by voluntarily disclosing more information than regulations mandate and that such efforts improve liquidity. Firms respond to an exogenous loss of public information by providing more timely and informative earnings guidance. Responses appear motivated by a desire to reduce information asymmetries between retail and institutional investors. Liquidity improves as a result and in turn increases firm value. This suggests that managers can causally influence their cost of capital via voluntary disclosure.

Number of Pages in PDF File: 57

Keywords: Liquidity, Voluntary disclosure, Earnings guidance, Information production, Management communication, Investor relations, Analyst coverage, Retail investors

JEL Classification: G12, G24, M41

Accepted Paper Series


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Date posted: October 28, 2011 ; Last revised: August 25, 2013

Suggested Citation

Balakrishnan, Karthik and Billings, Mary Brooke and Kelly, Bryan T. and Ljungqvist, Alexander, Shaping Liquidity: On the Causal Effects of Voluntary Disclosure (August 25, 2013). Journal of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1950123 or http://dx.doi.org/10.2139/ssrn.1950123

Contact Information

Karthik Balakrishnan
London Business School ( email )
Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
Mary Brooke Billings
New York University ( email )
44 West 4th Street
New York, NY NY 10012
United States
(212) 998-0097 (Phone)
Bryan T. Kelly
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8359 (Phone)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Alexander Ljungqvist (Contact Author)
New York University (NYU) - Department of Finance ( email )
Stern School of Business
44 West 4th Street, Suite 9-160
New York, NY 10012-1126
United States
212-998-0304 (Phone)
212-995-4220 (Fax)
HOME PAGE: http://pages.stern.nyu.edu/~aljungqv
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Research Institute of Industrial Economics (IFN) ( email )
Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
Feedback to SSRN


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References:  66
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