Topic: Measuring the Information Content of Accounting Disclosures
Speaker: Frank Zhang, Yale University
Time: Thursday, May 14th, 09:30-11:00a.m
Accounting research studies the impact of disclosure on different stakeholders, and relies on the ratio measure in Beaver (1968) to assess information content when the news disclosed is not easily determined. Variation in this ratio of return volatilities during disclosure event to non-event windows reflects variation in disclosure-related information. We develop a framework to show how the ratio also reflects variation in microstructure noise, normal information arrival, and mispricing, and suggest empirical proxies for these other determinants. To validate our framework, we exploit two plausibly exogenous shocks to microstructure noise and normal information arrival—the SEC’s Tick Size Pilot program and the 2004 amendments to Form 8-K filings. We also reexamine some prior results to show how inferences change when the ratio varies because of these other determinants. More generally, our framework and empirical proxies allow a more comprehensive understanding of the ways in which disclosure affects markets.
Frank Zhang is a professor at Yale University. His research focuses on empirical capital market researches, including stock anomalies, fundamental analysis, investor and analyst behavior, management incentives, and corporate financial reporting. He has published about 20 papers in leading accounting and finance journals, such as The Accounting Review, Journal of Accounting Research, Review of Accounting Studies, Journal of Finance, and Review of Financial Studies. He is currently a member of the FARS Steering Boad and an Associate Editor of Management Science. He has a PhD from the University of Chicago.
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