The Causal Effect of Market Transparency on Corporate Disclosure

54 Pages Posted: 31 May 2019 Last revised: 25 Jun 2019

See all articles by Georg Rickmann

Georg Rickmann

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: June 2019

Abstract

I study how increased market transparency affects firms’ disclosure incentives. I exploit the staggered introduction of TRACE, which made bond prices and transactions publicly observable, and show that firms provide more guidance when their bonds’ trading becomes observable. This effect is stronger for firms whose bond prices and trading are expected to contain more incremental information, and the additional disclosures tend to contain bad news. I corroborate my results using a small randomized controlled experiment conducted by the NASD. My results are consistent with the notion that investors’ access to market information limits managers’ incentives to withhold information and have important implications for regulators concerned with the transparency of financial markets.

Keywords: Market Transparency, TRACE, Corporate Disclosure, Bond Market

JEL Classification: M48, G18, G28, G38, D83

Suggested Citation

Rickmann, Georg, The Causal Effect of Market Transparency on Corporate Disclosure (June 2019). Available at SSRN: https://ssrn.com/abstract=3385114 or http://dx.doi.org/10.2139/ssrn.3385114

Georg Rickmann (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

77 Massachusetts Ave. E62-663
Cambridge, MA 02142
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
176
Abstract Views
721
rank
170,521
PlumX Metrics