Disclosure regulation and information risk

Abstract The present paper examines the impact of the Corporations Law Reform Act 1994 on information‐based trading in Australian Stock Exchange‐listed stocks. Results show that information‐based trading is higher in the post‐reform period, particularly for lower capitalization stocks. Further analysis shows that this is caused by a fall in turnover and rise in the number of slow trading days. After controlling for these factors, the reform is found to have no impact on information‐based trading. Interestingly, the volume of price‐sensitive disclosures is found to have no impact on either the level of information‐based trading or market spreads.