Disclosure Quantity and the Efficiency of Price Discovery: Evidence from the Toronto Stock Exchange

Review of Accounting and Finance, Vol. 15, No. 2, pp. 122-143, 2016

Posted: 9 Nov 2016

See all articles by Dennis Y. Chung

Dennis Y. Chung

Simon Fraser University

Karel Hrazdil

Simon Fraser University

Nattavut Suwanyangyuan

Brock University - Goodman School of Business; Simon Fraser University (SFU)

Date Written: October 30, 2015

Abstract

The purpose of this paper is to investigate the effect of the information disclosure quantity on the pricing efficiency of stocks. Using a sample of large and actively traded Canadian companies listed on the Toronto Stock Exchange, the authors utilize annual reports filed on system for electronic document analysis and retrieval (SEDAR) between 2003 and 2013 to estimate the amount of publicly available information and find that the length and size of annual reports are important determinants of short-horizon return predictability from historical order flows, which is an inverse indicator of market efficiency. The results show that longer and larger annual reports are associated with reduced information asymmetry, lower cost of immediacy, higher trading activity, and an overall improvement in the efficiency of price discovery. The results are robust to the inclusion of controls for various determinants of short-horizon return predictability, such as trading costs, volatility, informational effects and other firm-specific characteristics. Collectively, the findings provide empirical support for the benefits of detailed corporate disclosure in Canada.

Keywords: Market Efficiency, Disclosure Quantity, TSX

JEL Classification: G12, G14

Suggested Citation

Chung, Dennis Y. and Hrazdil, Karel and Suwanyangyuan, Nattavut, Disclosure Quantity and the Efficiency of Price Discovery: Evidence from the Toronto Stock Exchange (October 30, 2015). Review of Accounting and Finance, Vol. 15, No. 2, pp. 122-143, 2016, Available at SSRN: https://ssrn.com/abstract=2866614

Dennis Y. Chung

Simon Fraser University ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Karel Hrazdil (Contact Author)

Simon Fraser University ( email )

Faculty of Business Administration
8888 University Drive, Simon Fraser University
Burnaby, British Colombia V5A 1S6
Canada
778-782-6790 (Phone)
778-782-4920 (Fax)

HOME PAGE: http://www.sfubusiness.ca

Nattavut Suwanyangyuan

Brock University - Goodman School of Business ( email )

500 Glenridge Avenue
International Business and Strategy
St. Catherine's, Ontario L2S 3A1
Canada

Simon Fraser University (SFU) ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

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