The Impact of Mandated Cash Flow Disclosure on Bid-Ask Spreads
6 Pages Posted: 27 Mar 2006
Abstract
This study provides evidence that mandatory cash flow disclosure required by Approved Australian Accounting Standard AASB 1026, Statement of Cash Flows (June 1992) was associated with a decline in bid-ask spreads following the introduction of the regulation, even after controlling for changes in trading volume and price volatility. More pronounced decreases in bid-ask spreads were associated with firms having lower correlations between reported CFO and estimates of CFO using balance sheet reconstructions. We conclude that mandatory cash flow disclosure reduces information asymmetry across market participants.
Suggested Citation: Suggested Citation
Frino, Alex and Jones, Stewart, The Impact of Mandated Cash Flow Disclosure on Bid-Ask Spreads. Journal of Business Finance & Accounting, Vol. 32, No. 7-8, pp. 1373-1396, September 2005, Available at SSRN: https://ssrn.com/abstract=877427 or http://dx.doi.org/10.1111/j.0306-686X.2005.00632.x
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