Who Benefits from Voluntary Disclosure? Evidence from Italian Market Microstructure Data

54 Pages Posted: 14 Dec 2016 Last revised: 28 Jan 2017

Claudia Gabbioneta

Newcastle University Business School

Joachim Gassen

Humboldt University of Berlin - School of Business and Economics; Humboldt University of Berlin - Center for Applied Statistics and Economics (CASE)

Pietro Mazzola

IULM University

Date Written: December 12, 2016

Abstract

Using proprietary market microstructure data of Milan Stock Exchange and strategic plan presentations of Italian firms as disclosure events we explore the distributional effects of voluntary disclosure. We document systematic trading patterns around our disclosure events that on average generate two-month positive abnormal returns of 5.9% for investors trading large shares, while investors trading small shares experience negative abnormal returns of 5.3%. This economically large wealth distribution effect is triggered by large investors increasing their stakes in disclosing firms prior to news arrival irrespective of the nature of the news. Around news arrival, they sell their inventory to small investors in case of bad news. Our findings are particularly pronounced for smaller firms with event-related media coverage, and are consistent with sophisticated investors systematically exploiting attention-based trading behavior of unsophisticated investors triggered by the public dissemination of voluntary disclosure information in the Italian market.

Keywords: voluntary disclosure; market microstructure; heterogenous investors

JEL Classification: M41

Suggested Citation

Gabbioneta, Claudia and Gassen, Joachim and Mazzola, Pietro, Who Benefits from Voluntary Disclosure? Evidence from Italian Market Microstructure Data (December 12, 2016). Available at SSRN: https://ssrn.com/abstract=2885216 or http://dx.doi.org/10.2139/ssrn.2885216

Claudia Gabbioneta

Newcastle University Business School ( email )

Newcastle upon Tyne, NE1 7RU
United Kingdom

Joachim Gassen (Contact Author)

Humboldt University of Berlin - School of Business and Economics ( email )

Spandauer Str. 1
Berlin, D-10099
Germany
+49 30 2093 5764 (Phone)
+49 30 2093 5670 (Fax)

Humboldt University of Berlin - Center for Applied Statistics and Economics (CASE) ( email )

Spandauer Strasse 1
Berlin, D-10178
Germany

Pietro Mazzola

IULM University ( email )

Via Carlo Bo, 1
Milano
Italy
+3902891412636 (Phone)
+3902891412770 (Fax)

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