Disclosure quality,price efficiency,and expected returns |
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| Institution: | 1. Guangdong University of Finance and Economics, China;2. Yuan Ze University, Taiwan;3. Newhuadu Business School at Minjiang University, China;4. Research Center for Regional Finance and Innovation, Minjiang University, China;1. School of Economics and Management, Beihang University, Beijing, China;2. Beijing Advanced Innovation Center for Big Data and Brain Computing, BeihangUniversity, Beijing, China;3. Key Laboratory of Complex System Analysis, Management and Decision (BeihangUniversity), Ministry of Education, Beijing, China;1. Department of Economics, University of Victoria, Canada;2. Department of Electrical and Computer Engineering, Queen’s University, Canada;3. Beedie School of Business, Simon Fraser University, Canada |
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| Abstract: | Using a composite disclosure quality measure, we examine the effect of disclosure quality on price delay and the effect of price delay determined by disclosure quality on expected returns in the Taiwan stock market. We find that higher disclosure quality can reduce stock price delay through more investor attention and higher stock liquidity after we control for accounting quality variables and consider the endogeneity issue. Furthermore, we show that disclosure quality reduces expected stock returns through the price efficiency channel associated with both investor attention and stock liquidity. Our results indicate that increasing a firm’s standardized information rating by one standard deviation can reduce its expected stock return by 0.63% annually. Taken together, our evidence suggests that regulatory activities enforced to improve public firms’ disclosure quality in the Taiwan stock market can make the stock market more efficient and therefore lower investors’ required return for stocks. |
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| Keywords: | Disclosure quality Information rating Price delay Expected returns Taiwan stock market |
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