Shaping Liquidity: On the Casual Effects of Voluntary Disclosure

48 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

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

Date Written: September 2012

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, Shaping Liquidity: On the Casual Effects of Voluntary Disclosure (September 2012). NYU Working Paper No. 2451/31614. Available at SSRN: https://ssrn.com/abstract=2323505

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

Stockholm School of Economics ( email )

111 60 Stockholm
Sweden

Centre for Economic Policy Research (CEPR)

London
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

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