Shaping Liquidity: On the Causal Effects of Voluntary Disclosure

47 Pages Posted: 10 Sep 2013

See all articles by Karthik Balakrishnan

Karthik Balakrishnan

Rice University - Jesse H. Jones Graduate School of Business

Mary Brooke Billings

New York University

Bryan T. Kelly

Yale SOM; AQR Capital Management, LLC; National Bureau of Economic Research (NBER)

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR); Swedish House of Finance; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: December 2011

Abstract

Can managers influence the liquidity of their shares? We use plausibly exogenous variation in the supply of public information to show that firms seek to actively shape their information environments by voluntarily disclosing more information than is mandated by market regulations and that such efforts have a sizeable and beneficial effect on liquidity. Firms respond to an exogenous loss of public information by providing more timely and informative earnings guidance. Responses are greatest when firms lose local information producers and appear motivated by a desire to communicate with retail investors. Liquidity improves as a result of voluntary disclosure.

Suggested Citation

Balakrishnan, Karthik and Billings, Mary Brooke and Kelly, Bryan T. and Ljungqvist, Alexander and Ljungqvist, Alexander, Shaping Liquidity: On the Causal Effects of Voluntary Disclosure (December 2011). NYU Working Paper No. 2451/31352, Available at SSRN: https://ssrn.com/abstract=2323471

Karthik Balakrishnan

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Mary Brooke Billings

New York University ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States
(212) 998-0097 (Phone)

Bryan T. Kelly

Yale SOM ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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