Information asymmetry and the ex ante impact of public disclosure quality on price efficiency and the cost of capital: : evidence from a laboratory market

• Autores: Orie E. Barron, Hong Qu
• Localización: Accounting review: A quarterly journal of the American Accounting Association, ISSN 0001-4826, Vol. 89, Nº 4, 2014, págs. 1269-1297
• Idioma: inglés
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• Resumen

  • This paper examines the ex ante effects of public information quality on market prices and how such effects vary with information asymmetry among traders in a two-period experimental market. We vary public information quality by changing its precision and information asymmetry among traders by varying the distribution of private signals. We find high-quality public disclosure leads to increased price efficiency and decreased cost of capital in the pre-announcement period when information asymmetry is high. The impending high-quality public information increases the competition among informed traders, which leads prices to impound more private information and alleviates the adverse selection problems facing uninformed traders. Our study suggests building a high-quality public information environment (e.g., by adopting high-quality accounting standards or committing to transparent disclosure policies) would likely provide ex ante benefits for firms with significant adverse selection among traders