The effect of market transparency on corporate disclosure
Name
1227097625-MIT.pdf
Size
1.05 MB
Format
Adobe PDF
Checksum (MD5)
1a9cce109fed885411c28bedff10d4cb
Author(s)
Rickmann, Georg(Georg Alexander)
Advisor(s)
Eric So and Rodrigo Verdi.
Date Issued
2020
Publisher
Massachusetts Institute of Technology
Abstract
Market prices and trading in financial markets are important information signals that reveal firm specific information to the public. I study how the observability of such prices and trading (hereafter, "market transparency") affects firms' disclosure incentives. I exploit the staggered introduction of TRACE, which made bond prices and transactions publicly observable, and show that firms provide more guidance when their bonds' prices and trading become observable. This effect is stronger for firms with informationally sensitive bonds and firms without exchange-listed bonds prior to TRACE. Also, firms become particularly more likely to disclose bad news, consistent with the notion that investors' access to market information limits managers' incentives to withhold information. I corroborate my results using (1) a small controlled experiment, in which prices and trading are revealed for a randomized set of bonds, and (2) threshold rules used by the regulator. Taken together, my results suggest that observable market outcomes inform investors not only directly, by aggregating and revealing investors' information and beliefs, but also indirectly by increasing corporate disclosure.
Description
Thesis: Ph. D., Massachusetts Institute of Technology, Sloan School of Management, September, 2020
Cataloged from student-submitted PDF version of thesis.
Includes bibliographical references (pages 52-54).
Subjects
Sloan School of Management.
MIT Department
Sloan School of Management
Terms of Use
MIT theses may be protected by copyright. Please reuse MIT thesis content according to the MIT Libraries Permissions Policy, which is available through the URL provided.
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