Kazuhisa Otogawa
Kobe University
Abstract: In Japan there has recently been a rapid increase in the number of firms disclosing quarterly earnings. I investigate the information asymmetry and market liquidity around the quarterly earnings announcements, by focusing on the bid-ask spreads and quoted depths. Prior theoretical research has indicated that information asymmetry is exacerbated and market liquidity is reduced just before and at the point of information disclosure, and that information asymmetry is improved and market liquidity is enhanced by disclosing public information. Using the transaction data of 121 firms that have implemented quarterly earnings reporting during 2001, I find that there are significant decreases in daily bid-ask spreads and slight increases in daily depths during the period just after releasing the quarterly earnings, which are consistent with the prediction based on prior studies. However, I donÂft find strong evidence that the spreads are wider and the depths lower during the pre-announcement and announcement periods.
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