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Does Stock Liquidity Shape Voluntary Disclosure? Evidence from the SEC Tick Size Pilot Program

SSRN Electronic Journal
2021
  • 1
    Citations
  • 2,147
    Usage
  • 6
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    1
    • Citation Indexes
      1
  • Usage
    2,147
    • Abstract Views
      1,743
    • Downloads
      404
  • Captures
    6
    • Readers
      5
    • Exports-Saves
      1
      • SSRN
        1
  • Ratings
    • Download Rank
      147,142

Article Description

Employing the SEC Tick Size Pilot Program that increases the minimum trading unit of a set of randomly selected small-capitalization stocks, we examine whether and how an exogenous change in stock liquidity affects corporate voluntary disclosure. Using difference-in-differences analyses with firm fixed effects, we find that treatment firms respond to the liquidity decline by issuing fewer management earnings forecasts, while in contrast, control firms do not exhibit a significant change. Next, we show that the effect is more pronounced when firms experience more severe liquidity decreases during the TSPP and rule out a set of alternative explanations. Further strengthening the identification, we find a consistent reversal effect after the end of the pilot program. To generalize our findings, we use voluntary 8-K filings and conference calls as alternative voluntary disclosure proxies and find similar effects. Overall, these findings show how an exogenous change in stock liquidity shapes the corporate information environment.

Bibliographic Details

Ole-Kristian Hope; Junhao Liu

Elsevier BV

Stock liquidity; voluntary disclosure; management guidance; management earnings forecasts; SEC Tick Size Pilot Program

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