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Effects of frequent information disclosure: the case of daily net asset value reporting for closed-end investment companies

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  • Gary McCormick
  • Dan French

Abstract

There are two competing hypotheses regarding the effects of increased financial disclosure. One states that increased disclosure leads to decreased information asymmetry and more efficient pricing resulting in reduced bid-ask spreads, volatility and illiquidity. The other says that increased disclosure places additional burdens on traders leading to increased transactions costs and volatility. This paper examines the effects of more-frequent reporting for the case of closed-end funds that voluntarily changed their net-asset-value reporting from weekly to daily beginning in 1998. Multivariate analyses indicate a decrease in asymmetric information following initiation of daily reporting as evidenced by lower spreads, greater transactions volume, reduced volatility and decreased illiquidity. We conclude that closed-end fund daily net-asset-value reporting provides an example of information disclosure that provides useful information to investors and reduces information asymmetry. Copyright Springer Science+Business Media New York 2016

Suggested Citation

  • Gary McCormick & Dan French, 2016. "Effects of frequent information disclosure: the case of daily net asset value reporting for closed-end investment companies," Review of Quantitative Finance and Accounting, Springer, vol. 46(1), pages 107-122, January.
    • Handle: RePEc:kap:rqfnac:v:46:y:2016:i:1:p:107-122
    DOI: 10.1007/s11156-014-0463-3
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    More about this item

    Keywords

    Closed-end funds; Disclosure; Information asymmetry; G14; G23;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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