Disclosure Effects in the Laboratory: Liquidity, Depth, and the Cost of Capital

Posted: 24 Sep 2001

See all articles by Robert J. Bloomfield

Robert J. Bloomfield

Cornell University - Samuel Curtis Johnson Graduate School of Management

T. Jeffrey Wilks

Brigham Young University

Abstract

Improved disclosure increases prices and liquidity in a laboratory financial market, and does so more strongly when investors face the risk of unpredictable demand shocks. These results are consistent with a broad class of theoretical and empirical studies. Disclosure has larger effects on prices and liquidity at greater market depths. We conclude that archival studies looking only at quoted transaction prices and spreads (which typically pertain to small transactions) may underestimate the potential importance of disclosure on larger transactions that occur at greater market depths.

Note: This paper was formerly titled "Disclosure, Transaction Costs and Investor Clienteles"

JEL Classification: M41, G12

Suggested Citation

Bloomfield, Robert J. and Wilks, Thomas Jeffrey, Disclosure Effects in the Laboratory: Liquidity, Depth, and the Cost of Capital. Accounting Review, Vol. 75, No. 1, January 2000. Available at SSRN: https://ssrn.com/abstract=284966

Robert J. Bloomfield (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

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Thomas Jeffrey Wilks

Brigham Young University ( email )

School of Accountancy
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Provo, UT 84602 84602
United States
801-422-3930 (Phone)
801-422-0621 (Fax)

HOME PAGE: http://marriottschool.byu.edu/directory/details?id=5337

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