|Chan, Fung-kin Judy
|Disclosure policy, information asymmetry, and liquidity in the Hong Kong equity market
|Hong Kong Polytechnic University -- Dissertations
Stock exchanges -- China -- Hong Kong
Department of Accountancy
|vi, 117 leaves ; 30 cm
|This thesis examines the relation between disclosure levels and market liquidity in the Hong Kong stock market. The findings of this thesis are consistent with those of Welker (1995) who concludes that disclosure levels are associated with market liquidity (proxy by the bid-ask spread). The results of this thesis support the argument that higher disclosure levels reduce information asymmetries. As the chance of informed traders holding up private information decreases (i.e. when market dealers perceive that the potential loss for trading with informed traders in the stock market decreases), market dealers may narrow the bid-ask spread accordingly. As a result, market liquidity of the stock market increases. The data used for the disclosure score in this thesis are the same as those used by Kealey (1999). The negative relation between the variables disclosure level and bid-ask spread is significant even after controlling the effects of other variables. The determinants of the bid-ask spread used in this thesis include price, trading volume and standard deviation of returns. The determinants of the disclosure level (besides the bid-ask spread) include price, standard deviation of returns, return on common equity and an indicator variable which takes into consideration any new securities or debts offerings during the year in question. We also test the sensitivity of the bid-ask spread to historical disclosures and forthcoming disclosures. The results indicate that both historical and forthcoming disclosures are negatively related to the bid-ask spread and the results are statistically significant. The coefficient and t statistic for historical disclosures are greater tan those for forthcoming disclosures.
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