Does Public Disclosure Crowd Out Private Information Production?

54 Pages Posted: 19 Dec 2018 Last revised: 8 Dec 2019

See all articles by Jia Chen

Jia Chen

Peking University

Ruichang Lu

Department of Finance, Guanghua School of Management, Peking University

Date Written: March 28, 2019

Abstract

Using a natural experiment of the staggered dissemination of trading information in the corporate bond market, we find that when public disclosure increases, private information production reduces. The reduction in information production is indicated by fewer bond analyst reports, fewer pages in each report, and smaller file sizes. Increased public disclosure leads to less delay of bond prices, bond prices more closely approximating random walks, and shorter bond return drifts after bond analyst reports or credit rating changes. Our results highlight that while increased public disclosure crowds out private information production, it has a positive net effect on pricing efficiency.

Keywords: Public disclosure, Crowding out, Private information production, Bond analysts

JEL Classification: G12, G14, G24, G28

Suggested Citation

Chen, Jia and Lu, Ruichang, Does Public Disclosure Crowd Out Private Information Production? (March 28, 2019). Available at SSRN: https://ssrn.com/abstract=3294142 or http://dx.doi.org/10.2139/ssrn.3294142

Jia Chen (Contact Author)

Peking University ( email )

5 Yiheyuan Road
Haidian District
Beijing, Beijing 100871
China

Ruichang Lu

Department of Finance, Guanghua School of Management, Peking University ( email )

Beijing
China

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