Empirical Evidence on the Role of Trading Suspensions in Disseminating New Information to the Capital Market

39 Pages Posted: 25 Apr 2005

See all articles by Rezaul Kabir

Rezaul Kabir

University of Twente - Department of Finance and Accounting

Peter-Jan Engelen

Utrecht University - School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 2005

Abstract

This paper examines the effect of temporarily suspending the trading of exchange-listed individual stocks. We evaluate whether regulatory authorities can successfully use the mechanism of trading suspension in forcing companies to disclose new and material information to the capital market. Previous studies on trading suspensions mainly concentrate on North-American stock markets and find conflicting results. This study utilizes a new data set comprising of firms listed on Euronext Brussels - an important segment of Europe's leading cross-border exchange. Our results show that suspension is indeed an effective means of disseminating new information. Stock prices adjust completely and instantaneously to the new information released during trading suspensions. We also observe a significant increase in trading volume with the reinstatement of trading. On the other hand, we do not find support for the claim that trading suspensions increase the volatility of stock prices. Overall, our results show the efficacy of trading suspensions in disseminating new information.

Keywords: Trading suspension, trading halt, information disclosure, regulation, stock market

JEL Classification: G10, G14, G18

Suggested Citation

Kabir, Rezaul and Engelen, Peter-Jan, Empirical Evidence on the Role of Trading Suspensions in Disseminating New Information to the Capital Market (April 2005). Available at SSRN: https://ssrn.com/abstract=706401 or http://dx.doi.org/10.2139/ssrn.706401

Rezaul Kabir (Contact Author)

University of Twente - Department of Finance and Accounting ( email )

Faculty of Behavioral, Management & Social Science
P. O. Box 217
Enschede, 7500 AE
Netherlands
+31 53 489 4512 (Phone)
+31 53 489 2159 (Fax)

HOME PAGE: http://https://people.utwente.nl/r.kabir

Peter-Jan Engelen

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

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