Abstract:
It is generally believed that the provision of more frequent information will make markets more efficient. However at some point the marginal gain will become trivial and the cost of providing and processing the information may well exceed the gain. Most work on this issue relating to corporate disclosure is in the context of advanced countries and it may be that the balance of gains is different in emerging markets where the distortions are greater. From a natural experiment, the author is able to look at the gains which may have been reaped from the introduction of quarterly disclosure in Malaysia (from the previous bi-annual disclosure). Some firms were already disclosing voluntarily, therefore, a difference-in-differences (DID) study is undertaken to compare the two groups very closely despite all the other changes that have occurred over the same period. The sample data relates to all the main firms quoted the Malaysian stock exchange between 1997 and 2001 with introduction of mandatory quarterly disclosure starting in 1999. Unfortunately, the two treated group and the control group are rather different in characteristics. So, a specific form of DID is used to account for this. The choice of Malaysia is helpful in that it was one of the earliest movers to quarterly disclosure among the Asian emerging markets. So, other emerging markets can take advantage of the experience in judging whether to make similar changes themselves and the Malaysian authorities can consider whether they have reached the limits of improving disclosure. The results suggest that there are gains from requiring quarterly disclosure but the evidence is not particularly clear cut.
