Got Information? The Efficiency of Price Discovery of Quantitative Corporate Disclosures (original) (raw)

2016

Abstract

Using a comprehensive sample of actively traded US companies, we analyze how the quantity of information in corporate disclosures affects the efficiency with which investors incorporate newly arriving information into stock prices. Specifically, we consider both numerical and textual levels of detail provided in 10-K disclosures: (1) disaggregation (numerical) quantity (DQ) that captures the ‘fineness’ of accounting line items in 10-K filings and (2) textual quantity (TQ) that captures the amount of ‘soft’ or narrative information in annual reports, and document that both DQ and TQ are associated with reduced information asymmetry, lower cost of immediacy, higher trading activity, and an overall improvement in the efficiency of information price discovery. Collectively, our results provide empirical support for the benefits of detailed corporate disclosure, whether numerical or textual.

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