Does the large amount of information in corporate disclosures hinder or enhance price discovery in the capital market?
2019
Abstract
We analyze how the quantity of information in corporate disclosures affects the efficiency with which investors incorporate newly acquired information into stock prices. Specifically, we investigate both numerical and textual levels of detail provided in 10-K disclosures: (1) disaggregation (numerical) quantity (DQ) capturing the 'fineness' of accounting line items and (2) textual quantity (TQ) capturing the amount of 'soft' or narrative information.
We find that both DQ and TQ are associated with an overall improvement in the efficiency of information price discovery. Our results provide empirical support for the benefits of detailed numerical and textual corporate disclosure. (C) 2018 The Authors