Another Look: The Impact of Multi-Dimensional Corporate Transparency on US Firms’ Market Liquidity and Analyst Forecast Properties

Using a multi-dimensional model of corporate transparency developed by DeBoskey and Gillett (2011) based on disclosure information, intermediary information, earnings quality information, and insider information, this study extends their findings to examine whether corporate transparency has significant power to explain cross-sectional variation in market liquidity (measured by bid-ask spreads and market depth) and analyst forecast properties (measured by analyst forecast accuracy and analyst forecast dispersion). We find that: (i) market depth and analyst forecast dispersion are significantly associated with public disclosure information transparency; (ii) market depth, forecast dispersion and forecast error are significantly associated with intermediary information transparency; and (iii) relative bid-ask spreads is signficantly associated with earnings quality information. Our findings offer an extended view of the impact of corporate transparency on a set of criterion variables expanded beyond firm-level ones to include market participants such as dealers/specialists who rely to some extent on company-provided information.