Information disclosure and stock liquidity

Evidence from borsa Italiana

Alex Frino*, Riccardo Palumbo, Francesco Capalbo, Dionigi Gerace, Vito Mollica

*Corresponding author for this work

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

This article examines the effect of increased corporate information disclosure on stock liquidity. Using the adoption of International Financial Reporting Standards (IFRS) in Italy as a natural experiment we extend previous work examining the effect on one measure of liquidity-bid-ask spreads-to others, specifically depth and the price impact of transactions (or effective bid-ask spreads). Consistent with previous research we find that bid-ask spreads of stocks decline following the introduction of IFRS, which implies that stock liquidity increases for small traders. However, we also provide evidence that depth at the best quotes declines, which challenges the proposition that liquidity increases for large trades following an increase in disclosure. In additional tests, we find that effective bid-ask spreads of block trades also decline following the introduction of IFRS. Overall, this evidence confirms that stock liquidity for both small and large trades increases following an increase in corporate information disclosure. Abacus

Original languageEnglish
Pages (from-to)423-440
Number of pages18
JournalAbacus
Volume49
Issue number4
DOIs
Publication statusPublished - Dec 2013

Fingerprint Dive into the research topics of 'Information disclosure and stock liquidity: Evidence from borsa Italiana'. Together they form a unique fingerprint.

Cite this