Isolating the Effect of Disclosure on Information Risk

Journal of Accounting and Economics, Forthcoming

51 Pages Posted: 3 Sep 2009 Last revised: 4 May 2016

See all articles by Vicki Wei Tang

Vicki Wei Tang

Georgetown University - Robert Emmett McDonough School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: March 2, 2011

Abstract

This study examines companies with two classes of shares that entitle their holders to identical cash flow and voting rights but that are available to mutually exclusive sets of investors: A shares to domestic investors and B shares to foreign investors. Price differences between A and B shares are higher in firms with a greater disparity in the disclosures that they make to domestic and foreign investors. This association is more pronounced when the cost (benefit) of information transfer is higher (lower). The results suggest that disclosure disparity creates meaningful differences in investors’ average information precision across A and B shares and thus influences the cross-sectional variation in price differences.

Keywords: Disclosure; Accounting standards; Information risk; Fundamental risk; Information cost; Language; Distance; Arbitrage; Protection of property rights; China

JEL Classification: M41, G14

Suggested Citation

Tang, Vicki Wei, Isolating the Effect of Disclosure on Information Risk (March 2, 2011). Journal of Accounting and Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1466135

Vicki Wei Tang (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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