Disclosure regulation and information risk
The present paper examines the impact of the Corporations Law Reform Act 1994 on information-based trading in Australian Stock Exchange-listed stocks. Results show that information-based trading is higher in the post-reform period, particularly for lower capitalization stocks. Further analysis shows that this is caused by a fall in turnover and rise in the number of slow trading days. After controlling for these factors, the reform is found to have no impact on information-based trading. Interestingly, the volume of price-sensitive disclosures is found to have no impact on either the level of information-based trading or market spreads.