Trading Venue and Voluntary Earnings Disclosure: The NYSE Specialist Market Versus the NASDAQ Dealer Market

42 Pages Posted: 12 Dec 2006

See all articles by Laura Frieder

Laura Frieder

Purdue University - Krannert School of Management

Inho Suk

State University of New York (SUNY) at Buffalo - School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: November 24, 2006

Abstract

We investigate whether managers' disclosure decisions about earnings forecasts, and price responses to these forecasts, are related to the type of exchange on which their firm's equity is listed: the NYSE specialist market v. the NASDAQ dealer market. After controlling for postulated determinants of voluntary disclosure and exchange listing, we find not only that firms traded on the NYSE market are more likely to disclose earnings but that these firms enjoy higher price responses to each unit of unexpected future earnings information. Our results obtain for firms that moved from the NASDAQ to the NYSE. These results imply that the marginal benefits to disclosure are higher on the specialist market. They are further consistent with previous evidence that adverse selection components of spreads are higher on the NYSE than on the NASDAQ (see Affleck-Graves, Hedge, and Miller (1994), among others). The findings uncovered in this paper also accord with the notion that, even with full disclosure, a monopolistic specialist can extract profits (Amihud and Mendelson (1982)), but a finite number of liquidity providers, or market makers, cannot (Kyle (1989) or Baruch (2005)). Our results are robust to controlling for the effect of Regulation FD implemented by the SEC in 2000.

Suggested Citation

Frieder, Laura and Suk, Inho, Trading Venue and Voluntary Earnings Disclosure: The NYSE Specialist Market Versus the NASDAQ Dealer Market (November 24, 2006). Available at SSRN: https://ssrn.com/abstract=950897 or http://dx.doi.org/10.2139/ssrn.950897

Laura Frieder

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Inho Suk (Contact Author)

State University of New York (SUNY) at Buffalo - School of Management ( email )

342 Jacobs Management Center
Buffalo, NY 14260-4000
United States
716-645-3215 (Phone)

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