Does Disclosure Improve Efficiency?

40 Pages Posted: 15 Mar 2012 Last revised: 12 Sep 2014

See all articles by Bing Han

Bing Han

University of Toronto, Rotman School of Management

Yu-Jane Liu

National Chengchi University (NCCU) - Department of Finance and Banking

Ya Tang

Peking University - Guanghua School of Management

Lifeng Yu

Peking University - Guanghua School of Management

Date Written: August 4, 2014

Abstract

This paper investigates the efficiency consequences of firm disclosure. Using accounting and financial data in the Chinese market, the largest emerging market dominated by noise traders, we find that disclosure attracts noise trading and reduces the amount of information learned by firms from market prices, which in turn harms investment efficiency. Our results indicate that disclosure can negatively affect market efficiency and real investment performance in markets where noise trading increases with disclosure. Our results shed new lights on the dark side of disclosure for both informational and allocative efficiency.

Keywords: Noise Trading, Disclosure, Informational Efficiency, Allocative Efficiency, Informational Feedback Effect

JEL Classification: D61, G14, G30, M41

Suggested Citation

Han, Bing and Liu, Yu-Jane and Tang, Ya and Yu, Lifeng, Does Disclosure Improve Efficiency? (August 4, 2014). Available at SSRN: https://ssrn.com/abstract=2022575 or http://dx.doi.org/10.2139/ssrn.2022575

Bing Han

University of Toronto, Rotman School of Management ( email )

Toronto, Ontario M5S 3E6
Canada
4169460732 (Phone)

Yu-Jane Liu

National Chengchi University (NCCU) - Department of Finance and Banking ( email )

64, Chih-nan Rd., Sec. 2, Mucha,
Taipei, 116
Taiwan ROC
(882)-2-2939-3091 ext. 81123 (Phone)

Ya Tang (Contact Author)

Peking University - Guanghua School of Management ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Lifeng Yu

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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