Stock market liquidity and information asymmetry around voluntary earnings disclosures

Purpose – The purpose of this paper is to examine whether non‐mandated earnings disclosures include value‐relevant information and affect information asymmetry and stock market liquidity.Design/methodology/approach – The event study methodology explores the informational content of good, bad and neutral voluntary earnings disclosures. The OLS panel regression framework is, then, used to analyze information asymmetry and stock market liquidity subsequent to both categories of voluntary earnings disclosures (i.e. earnings forecasts and quarterly earnings disclosures).Findings – Empirical tests show that voluntary earnings disclosures include material information and that bad news is released in an untimely fashion leading to information leakage in the pre‐announcement period. The results also indicate that quarterly earnings enhance stock market liquidity by shrinking bid‐ask spreads. However, earnings forecasts exacerbate information asymmetry before and after the announcement date. This result confirms th...

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