Quasi-experimental analysis reveals reduced voluntary disclosure in Nasdaq-listed firms after liquidity reforms, suggesting substitution across bid-ask spread components.
Key Points
To determine whether exogenous improvements in stock liquidity, independent of the underlying information environment, influence managers' voluntary disclosure decisions.
Exploited the 1997 Nasdaq market reforms as an exogenous shock that reduced the non-information asymmetry components of the bid-ask spread.
Evaluated changes in voluntary disclosure choices among treated Nasdaq firms relative to an unaffected control group.
Nasdaq firms reduced voluntary disclosure relative to control firms following the exogenous improvement in stock liquidity.
Lower voluntary disclosure elevated the information asymmetry component of the bid-ask spread, yet total stock liquidity improved overall, indicating minimal marginal benefit from maintaining prior disclosure levels.