Discretionary Disclosure of Customer Information and Average Stock Returns

52 Pages Posted: 25 Aug 2012 Last revised: 12 Jul 2013

See all articles by Li-Wen Chen

Li-Wen Chen

National Chung Cheng University

Hsin-Yi Yu

University of Edinburgh - Organisation Studies; National University of Kaohsiung; University of Edinburgh - Accounting and Finance

Chia-Tien Hsieh

Durham Business School

Date Written: July 1, 2013

Abstract

Firms with lower levels of disclosure hold more private information and thereby generate undiversified risk. This paper investigates the effect of discretionary disclosure of customer identities on average stock returns. Using a data set of firms’ principal customers, we find a negative relationship between the disclosure level of customer information and the cross-section of returns, after controlling for size, book-to-market ratio, momentum, and other return determinants. We also observe that individual investors are inclined to buy stocks that report more customer information. Overall, poor information on customer identity has higher costs of capital than do firms with good information quality.

Keywords: Corporate Disclosure, Customer, Information Risk, Stock Returns, Order Imbalance

JEL Classification: G12, G14

Suggested Citation

Chen, Li-Wen and Yu, Hsin-Yi and Hsieh, Chia-Tien, Discretionary Disclosure of Customer Information and Average Stock Returns (July 1, 2013). Available at SSRN: https://ssrn.com/abstract=2133129 or http://dx.doi.org/10.2139/ssrn.2133129

Li-Wen Chen

National Chung Cheng University ( email )

Min-Shiung, Chia-Yi, 621
Taiwan

Hsin-Yi Yu (Contact Author)

University of Edinburgh - Organisation Studies ( email )

50 George Square
William Robertson Building
Edinburgh EH8 9JY
UNITED KINGDOM

National University of Kaohsiung ( email )

Kaohsiung, 803
Taiwan

University of Edinburgh - Accounting and Finance ( email )

William Robertson Building
Edinburgh EH8 9JY
United Kingdom

Chia-Tien Hsieh

Durham Business School ( email )

Mill Hill Lane
Durham, Durham DH1 3LB
United Kingdom

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