35 Pages Posted: 23 Mar 2005
Date Written: March 15, 2005
We study the effect of the Securities Exchange Act of 1934 on common stock bid-ask spreads and other information measures. Among other things, the 1934 Act mandated a complete, audited income statement and balance sheet. Prior to the 1934 Act, some firms disclosed sales or depreciation, and some chose not to. Some firms reported audited financials; some did not. If disclosures and audits reduce information asymmetries, the 1934 Act should have a differential effect across these stocks. We find that a firm's disclosure status in 1933 has little to do with the evolution of its information measures. Overall, we find that cross-sectional differences in mandatory disclosure had little measurable effect on the degree of information asymmetry.
JEL Classification: G14, K22, N22
Suggested Citation: Suggested Citation
Jones, Charles M. and Daines, Robert, Mandatory Disclosure, Asymmetric Information and Liquidity: The Impact of the 1934 Act (March 15, 2005). AFA 2006 Boston Meetings Paper. Available at SSRN: https://ssrn.com/abstract=686888 or http://dx.doi.org/10.2139/ssrn.686888