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How does information disclosure affect liquidity? Evidence from an emerging market
(Elsevier Inc., 2019-01-01) Arango I.; Agudelo D.A.
Cross-sectional models positively relate firm information disclosure with stock liquidity, but dynamic models on days of news releases show the opposite relation. We investigate this relationship by studying the effects of information disclosure on liquidity and its determinants. We use trade and quote data from Colombia for 2015 and 2016, along with a complete database of news releases as reported by firms to the regulator. The results of panel data and panel vector autoregressive (PVAR) models suggest that news releases increase both informed and uninformed trading. Overall, the negative effect of news releases on liquidity is temporary and fully explained by increasing asymmetric information. © 2019 Elsevier Inc.