Patterns of disclosure and volatility effects in speculative industries. The case of small and mid‐cap metals and mining entities on the Australian securities exchange
| Published date | 25 July 2008 |
| Pages | 261-273 |
| Date | 25 July 2008 |
| DOI | https://doi.org/10.1108/13581980810888877 |
| Author | Phillip D. O'Shea,Andrew C. Worthington,David A. Griffiths,Dionigi Gerace |
| Subject Matter | Accounting & finance |
Patterns of disclosure
and volatility effects
in speculative industries
The case of small and mid-cap metals and mining
entities on the Australian securities exchange
Phillip D. O’Shea
School of Mathematics and Applied Statistics, University of Wollongong,
Wollongong, Australia
Andrew C. Worthington
Department of Accounting, Finance and Economics, Griffith University,
Brisbane, Australia
David A. Griffiths
School of Mathematics and Applied Statistics, University of Wollongong,
Wollongong, Australia, and
Dionigi Gerace
School of Accounting and Finance, University of Wollongong,
Wollongong, Australia
Abstract
Purpose – There is conjecture that small and mid-cap companies in highly speculative industries use
frequent and repetitive disclosure to promote price volatility and heighten market interest. Excessive
disclosure could indicate instances of self-promotion or poor disclosure practices, and these habits
could mislead investors. The purpose of this paper is to quantitatively investigate the impact of firm
disclosure on price volatility in the Australian stock market.
Design/methodology/approach – This paper considers the effect of information disclosure on the
daily stock price volatility of 340 Metals & Mining industry entities listed on the Australian Securities
Exchange over the period 2005-2007 using regression analysis.
Findings – The results indicate the numberof disclosures, the number of priceand non-price sensitive
disclosuresand the number of disclosuresby category has a significantinfluence on daily pricevolatility.
Moreover, thevolatility impact of disclosure is greaterfor small and mid-sized firms thanlarge firms.
Research limitations/implications – Price volatility is calculated using daily data; intra-day
stock prices could provide measures that are more accurate. There is also no attempt to allow for
asymmetry in disclosure; categorizing news as “good” or “bad” would allow better insights.
Practical implications – There is support for the conjecture that disclosure could serve as a
self-promotion tool through fabricated and repetitive announcements. Inadvertent poor disclosure
practice could also result in excessive price volatility. Disclosure practice requires ongoing
consideration by regulatory bodies.
Originality/value – This analysis complements basic work by the Australian regulator to establish
a quantitative link between disclosure practice and price volatility.
Keywords Disclosure, Information, Prices,Volatility, Australia, Securitiesmarkets
Paper type Research paper
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
Patterns of
disclosure and
volatility effects
261
Journal of Financial Regulation and
Compliance
Vol. 16 No. 3, 2008
pp. 261-273
qEmerald Group Publishing Limited
1358-1988
DOI 10.1108/13581980810888877
To continue reading
Request your trial